Completion Report

Project Number: 41121-043 Loan Numbers: 2697 and Cofin 8251 September 2016

Kazakhstan: CAREC Transport Corridor I (Zhambyl Oblast Section) [Western Europe–Western People's Republic of China International Transit Corridor] Investment Program (Tranche 3) This document is being disclosed to the public in accordance with ADB’s Public Communications Policy 2011.

CURRENCY EQUIVALENTS

Currency Unit – tenge (T)

At Appraisal At Project Completion (as of 25 October 2010) (22 April 2015)

T1.00 = $0.00678 $0.00538 $1.00 = T147.5 T185.8 (1 August 2016) ¥1.00 = $0.01069 $0.01110 $1.00 = ¥93.5 ¥90.1

ABBREVIATIONS

ACA – accepted contract amount ADB – Asian Development Bank AADT – annual average daily traffic BER – bid evaluation report CAREC – Central Asia Regional Economic Cooperation CLG – Community Liaison Group COR – Committee of Roads CPS – country partnership strategy CSC – construction supervision consultant DNP – defects notification period EA – executing agency EIA – environmental impact assessment EIRR – economic internal rate of return EMR – environmental monitoring report IDB – Islamic Development Bank IRI – international roughness index JICA – Japan International Cooperation Agency JSC – joint-stock company KARM – Kazakhstan Resident Mission KAZ – Kazakhstan KGZ – Kyrgyz Republic Km – kilometer marker km – kilometer LAR – land acquisition and resettlement LARP – land acquisition and resettlement plan LLP – limited liability partnership m – meter MFF – multitranche financing facility MID – Ministry of Investment and Development MOF – Ministry of Finance MOTC – Ministry of Transport and Communications PMC – project management consultant PRC – People’s Republic of China SPS – Safeguards Policy Statement ToR – terms of reference VOC – vehicle operating cost vpd – vehicles per day

GLOSSARY

Akim – Head of an akimat Akimat – A municipal, district, or provincial government CAREC

Corridor 1 – Western Europe-Western People’s Republic of China (PRC)

International Transit Corridor running from Khorgos at the border with PRC, through Almaty and Shymkent, to the western border with the Russian Federation

Facility – Multitranche financing facility provided by the Asian Development Bank (ADB) to finance projects under the Investment Program

Investment Program

– Central Asia Regional Economic Cooperation Transport Corridor I (Zhambyl Oblast Section) [Western Europe–Western People's Republic of China International Transit Corridor] Investment Program, financed by ADB, the Islamic Development Bank (IDB), and the Japan International Cooperation Agency (JICA)

Oblast – A local administrative unit analogous to a province Raion – A local administrative subdivision of the oblast, which is

analogous to a district Project 3 – Refers to the combined scope of ADB and JICA Tranche 3 – Refers to the scope under ADB loan proceeds alone

NOTES

(i) The fiscal year (FY) of the government and its agencies ends on 31 December. (ii) In this report, "$" refers to US dollars.

Vice-President W. Zhang, Vice-President (Operations 1) Director General S. O’Sullivan, Central and West Asia Department (CWRD) Director X. Yang, Transport and Communications Division (CWTC), CWRD Country Director

A. Chyngysheva, Kazakhstan Resident Mission (KARM), CWRD

Team leader V. Capulong, Senior Project Officer (Transport), CWRD Team members A. Chakenova, Project Officer, KARM K. Sakamoto, Transport Economist, CWRD O. Samukhin, Transport Specialist, CWRD N. Singru, Principal Portfolio Management Specialist, CWRD M. Villanueva, Associate Project Analyst, CWRD

In preparing any country program or strategy, financing any project, or by making any designation of or reference to a particular territory or geographic area in this document, the Asian Development Bank does not intend to make any judgments as to the legal or other status of any territory or area.

CONTENTS

Page

BASIC DATA i

MAP vi

I. PROJECT DESCRIPTION 1

II. EVALUATION OF DESIGN AND IMPLEMENTATION 1

A. Relevance of Design and Formulation 1 B. Project Outputs 3 C. Project Costs 4 D. Disbursements 4 E. Project Schedule 5 F. Implementation Arrangements 6 G. Conditions and Covenants 7 H. Consultant Recruitment and Procurement 7 I. Performance of Consultants and Contractors 8 J. Performance of the Borrower and the Executing Agency 9 K. Performance of the Asian Development Bank 9

III. EVALUATION OF PERFORMANCE 10

A. Relevance 10 B. Effectiveness in Achieving Outcome 10 C. Efficiency in Achieving Outcome and Outputs 11 D. Preliminary Assessment of Sustainability 12 E. Impact 13

IV. OVERALL ASSESSMENT AND RECOMMENDATIONS 14

A. Overall Assessment 14 B. Lessons 15 C. Recommendations 15

APPENDIXES

1. Design and Monitoring Framework 16 2. Summary of the Investment Program and its Projects 18 3. Summary Engineering Design 19 4. Project Contract Packages 20 5. Project Cost and Financing Plan 22 6. Disbursement of ADB and JICA Loan Proceeds 23 7. Project Implementation Schedule 24 8. Chronology of Major Events 25 9. Project Organizational Structure 27 10. Status of Compliance with Loan 2697-KAZ Covenants 28 11. Contribution to the ADB Results Framework 38 12. Economic Reevaluation 39 13. Environment and Social Safeguards 44 14. Project Overall Assessment 47

BASIC DATA A. Loan Identification 1. Country 2. Loan Numbers 3. Project Title 4. Borrower 5. Executing Agency 6. Amount of ADB Loan Amount of JICA Loan 7. Project Completion Report Number

Kazakhstan 2697 and Cofin 8251 CAREC Transport Corridor I (Zhambyl Oblast Section) [Western Europe–Western People's Republic of China International Transit Corridor] Investment Program (Tranche 3) Republic of Kazakhstan Ministry of Investments and Development $173,000,000 ¥6,361,000,000 ($68,000,000 equivalent) 1595

B. Loan Data B.1 Loan 2697-KAZ

1. Fact-Findinga

– Date Started – Date Completed 2. Loan Negotiations – Date Started – Date Completed 3. Date of Board Approval 4. Date of Loan Agreement 5. Date of Loan Effectiveness – In Loan Agreement – Actual – Number of Extensions 6. Closing Date – In Loan Agreement – Actual – Number of Extensions 7. Terms of Loan – Interest Rate – Commitment Charges – Maturity (number of years) – Grace Period (number of years)

2 February 2010 13 February 2010 30 June 2010 30 June 2010 15 November 2010 15 December 2010 60 days after the date of the Loan Agreement 13 February 2011 15 June 2011 2 31 December 2013 22 April 2015 1 Sum of the London-interbank offered rate and 0.60% as provided by Section 3.02 of the Loan Regulations, less a credit of 0.40% as provided by Section 3.03 of the Loan Regulations 0.15% per annum 19 years 4 years

a No further appraisal missions (OM D11/OP) were conducted after January 2010.

ii

8. Disbursements a. Dates Initial Disbursement

13 December 2011

Final Disbursement 22 April 2015

Time Interval 40.37 months

Effective Date

15 June 2011 Actual Closing Date

22 April 2015

Time Interval 46.27 months

b. Amount ($ million)

Category

Original Allocation

Last Revised

Allocation

Amount

Canceled

Net Amount

Available

Amount

Disbursed

Undisbursed

Balancea

1. Works 149.81 166.13 0.00 166.13 160.27 5.86 2. Consulting Services 6.87 6.87 0.00 6.87 4.40 2.47 3. Unallocated 16.32 0.00 0.00 0.00 0.00 0.00 Total 173.00 173.00 0.00 173.00 164.67 8.33 a This amount was cancelled at the loan closing date of 22 April 2015.

9. Local Costs (Financed): Not applicable. B.2 Loan 8251-KAZ 1. Loan Negotiations – Date Started – Date Completed 2. Date of Approval 3. Date of Loan Agreement 4. Date of Loan Effectiveness – In Loan Agreement – Actual – Number of Extensions 5. Closing Date – In Loan Agreement – Actual – Number of Extensions 6. Terms of Loan – Interest Rate – Commitment Charges – Maturity (number of years) – Grace Period (number of years)

14 April 2010 14 April 2010 31 May 2010 23 August 2010 15 July 2011 None 15 July 2020 1 August 2016 None 1.7% per annum (fixed) 0.1% per annum 25 years 7 years

7. Disbursements a. Dates Initial Disbursement

19 December 2011

Final Disbursement 31 March 2016

Time Interval 52.13 months

Effective Date

15 July 2011 Actual Closing Date

1 August 2016 Time Interval 61.47 months

iii

b. Amounts ($ million)

Category

Original

Allocationa

Last Revised

Allocationb

Amount

Canceled Net Amount Available

b

Amount

Disbursedb

Undisbursed

Balancec

1. Works 56.77 69.22 0.00 69.22 68.33 0.90 2. Contingencies 11.23 1.37 0.00 1.37 0 1.37 Total 68.00 70.59 0.00 70.59 68.33 2.27 a

US dollar equivalent of ¥6,361,000,000 at approval date. b

Current US dollar equivalent as of 3 June 2016. c

This amount was cancelled at the loan closing date of 1 August 2016.

8. Local Costs (Financed): Not applicable. C. Project Data

1. Project Cost ($ million)

Cost Appraisal Estimatea Actual

Foreign Exchange Cost 281.00 269.31 Total 281.00 269.31

a The project cost was not split into foreign exchange and local currency categories at appraisal.

2. Financing Plan ($ million)

Cost Appraisal Estimate Actual

Implementation Costs Borrower Financed 40.00 36.31 ADB-financed 173.00 164.67 JICA-financeda 68.00 68.33

Total 281.00 269.31

ADB = Asian Development Bank, JICA = Japan International Cooperation Agency. a

US dollar equivalent of the loan in Japanese yen.

3. Cost Breakdown by Project Component ($ million)

Component Appraisal Estimate Actual

A. Base Costs 1. Civil Works

a. Km 383–404 (20 km) 66.79 76.53 b. Km 162–260 (80 km) 163.62 175.72 c. Korday to the Kyrgyz border

(17.7 km) 12.62 12.14

Subtotal Civil Works 243.03 264.39 2. Consulting Services

Construction Supervision Consultant 6.87 4.92 Subtotal Consulting Services 6.87 4.92 Total Base Cost 249.90 269.31 B. Contingency Total Contingencies 31.10 0.00 Total Project Cost 281.00 269.31

iv

4. Project Schedule

Item Appraisal Estimate Actual

Civil Works Km 383–404 (20 km) Invitation for Bids 15 September 2010 15 September 2010 Contract Award Date January 2011 12 August 2011 Completion Date March 2013 17 October 2013 Km 162–260 (80 km) Invitation for Bids 15 September 2010 15 September 2010 Contract Award Date January 2011 12 August 2011 Completion Date March 2013 6 November 2014 Korday to the Kyrgyz border (17.7 km) Invitation for Bids 15 September 2010 15 September 2010 Contract Award Date January 2011 8 November 2011 Completion Date December 2012 26 November 2014 Consulting Services Construction Supervision Consultant Recruitment Notice 23 August 2010 30 December 2010 Contract Award Date January 2011 4 April 2012 Completion of Services March 2013 31 December 2014

km = kilometer.

5. Project Performance Report Ratings

Implementation Period

Ratings

Development Objectives

Implementation Progress

From 15 November 2010a to 31 December 2010 Satisfactory Satisfactory

From 1 January 2011b to 31 December 2011

c Potential Problem

From 1 January 2012 to 30 June 2012 On track From 1 July 2012 to 31 December 2012 On track From 1 January 2013 to 30 June 2013 On track From 1 July 2013 to 31 December 2013 On track From 1 January 2014 to 30 June 2014 On track From 1 July 2014 to 31 December 2014 On track

a The loan was approved on 15 November 2010 and the loan agreement was signed on 15 December 2010.

b From 1 January 2011, the project performance rating system was replaced with the eOperations project performance rating system.

c The loan was declared effective on 15 June 2011.

D. Data on Asian Development Bank Missions

Name of Mission

a

Date

a

No. of Persons

No. of Person-Days

b Specialization of Members

Fact-Finding 2–13 February 2010 4 12 a, i, j, d Project Consultation

c 2–10 June 2010 3 7 a, j, d

Project Consultation 27 September–5 October 2010 2 6 a, j, d Safeguards (Social) Review 1 26 January–4 February 2011 1 2 g Safeguards Review 2 7–13 June 2011 3 21 h, g, k Project Review 1 13–19 July 2011 4 24 a, i, j Midterm Safeguards Review 6–15 August 2011 3 30 f, g, i Special Project Administration Review 4–11 October 2011 5 35 a, i, j Project Review 2 9–16 February 2012 6 42 a, e, i, j Project Review 3 23 April–4 May 2012 6 24 a, e, f, g, j, d

v

Name of Mission

a

Date

a

No. of Persons

No. of Person-Days

b Specialization of Members

Midterm Project Review 25 September–8 October 2012 8 14 a, f, g, i, j, k Project Review 4 3–12 April 2013 5 6 a, i Project Review 5 3–11 June 2013 3 4 a, i, j Safeguards Review 3 15–19 July 2013 1 1 g Project Review 6 21–30 October 2013 5 7 a, b, h, i Safeguards Review 4 5–7 March 2014 4 4 h, b, f, i Project Review 7 29 September–4 October 2014 5 5 a, b, i, c Project Review 8

d 2–6 March 2015 5 5 a, b, i, j

Project Review 9 25–30 May 2015 2 4 b, f, g, i Project Completion Review 15–22 October 2016 3 12 i, b, a, j, k

a All missions for this project were combined with other projects in Kazakhstan. The mission dates cover all ADB projects in Kazakhstan.

b Number of person-days allotted for the project.

c No appraisal missions (OM D11/OP) took place after January 2010.

d Final disbursements during the winding-up period were discussed.

a = transport specialist, b = public private partnership specialist, c = director of the Transport and Communications Division under ADB’s Central and West Asia Department (CWRD), d = country director (Kazakhstan Resident Mission), e = advisor, f = environment specialist, g = social development specialist, h = safeguard specialist, i = project/ operations officer, j = project/operations analyst, k = operations assistant.

I. PROJECT DESCRIPTION

1. The Central Asia Regional Economic Cooperation (CAREC) Transport Corridor I (Zhambyl Oblast Section) [Western Europe–Western People's Republic of China (PRC) International Transit Corridor] Investment Program, Project 3 (the project)1 aims to help develop an efficient transport system in Kazkhstan’s Zhambyl Oblast through shorter travel times, lower freight costs, and lower road crash rates. Improvements to road efficiency and safety would in turn boost international trade and regional cooperation to sustain economic development. To realize this objective, the project built 117.7-kilometer (km) of roads in Zhambyl Oblast. Construction was completed in November 2014. The project design and monitoring framework (DMF) is in Appendix 1. 2. Asian Development Bank (ADB) approved the loan of $173 million on 15 November 2010 to finance 97.7 km of road. Japan International Cooperation Agency (JICA), through a joint financing arrangement, approved the loan of ¥6.36 billion—an amount equivalent to $68 million—on 31 May 2010 for construction of the remaining 20 km. Kazakhstan’s Ministry of Transport and Communications (MOTC) was the executing agency (EA) of the project at appraisal, and the Committee of Roads (COR) under MOTC was the implementing agency. 3. The project is the third under the CAREC Transport Corridor 1 (Zhambyl Oblast Section) [Western Europe–Western PRC International Transit Corridor] Investment Program (the investment program), which covers 470 km in Zhambyl Oblast. ADB teamed up with JICA and Islamic Development Bank (IDB) to finance this investment program2 in response to a government request for international financing for road network improvements. Among the government’s priorities for road investments were the Western Europe–Western PRC International Transit Corridor (CAREC Corridor 1), which covers 2,715 km in roads sections from Khorgos, on the PRC border, through Almaty and Shymkent, to the country’s western border with the Russian Federation. 4. ADB approved a multitranche financing facility (MFF) on 12 November 2008, for an amount not exceeding $700 million, to contribute to this investment program. The loan for this project is the third tranche of the MFF. Appendix 2 presents the summary of the investment program and the projects that the MFF financed.

II. EVALUATION OF DESIGN AND IMPLEMENTATION

A. Relevance of Design and Formulation

5. The project’s overall design was relevant at appraisal. It was consistent with the government’s top-priority road investment along CAREC Corridor 1 as defined in the government’s medium-term Road Development Program for 2006–2012 3 to address core problems in the transport sector.4 The medium-term road program is part of the government’s

1 ADB. 2010. Periodic Financing Request Report for MFF0024-KAZ: CAREC Transport Corridor 1 (Zhambyl Oblast

Section) [Western Europe–Western PRC International Transit Corridor] Investment Program, Tranche 3. Manila. 2 ADB. 2008. Report and Recommendation of the President to the Board of Directors on the Proposed Multitranche

Financing Facility and Administration of Loan to the Republic of Kazakhstan for CAREC Transport Corridor 1 (Zhambyl Oblast Section) [Western Europe–Western PRC International Transit Corridor] Investment Program. Manila.

3 Ministry of Transport and Communications. 2006. Road Development Program for 2006–2012. Astana.

4 Core transport problems include poor quality existing road assets, weak management capacity, road maintenance

financing gaps, road safety issues, and poor traffic operations information system. These are detailed in ADB’s Report and Recommendation of the President on the MFF and Tranche 1.

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overall transport strategy for 2006–2015. 5 The project is also consistent with ADB Strategy 20206—which identifies transport infrastructure as a core area of ADB operations—and with ADB’s CAREC program, which emphasizes regional cooperation in transport, energy, and trade facilitation. The project is along CAREC Corridor 1, which is one of six corridors included in the CAREC Transport and Trade Facilitation Strategy7 that CAREC member countries endorsed in 2007. 6. Project preparation was adequate. MOTC’s Zhambyl Oblast Roads Department commissioned the road design preparation from the state design institutes: (i) KazDorProject Limited Liability Partnership (LLP) for the Km 383–483 and Km 162–260 road sections, and (ii) AstanaDorProject LLP for the section from Korday to the Kyrgyz border. The road construction designs8 complied with the country’s requirements. The detailed design and cost estimates were reviewed by the state project examination authority, GosExpertisa, and approved by the Agency of Construction Affairs in 2009. 7. As part of technical due diligence, several consultations through missions (fact-finding, project consultation, and safeguards missions) were conducted with various stakeholders, including the government, MOTC, COR, JICA, akims, and local communities along the proposed Project roads. ADB financed the services of consultants to update the safeguards reports and to conduct economic analyses for the road sections. 8. At completion, the project’s overall design remains substantially the same. It remains relevant as the project continues to be consistent with (i) the revised Transport Sector Program (2010–2014),9 which aimed to develop efficient transport infrastructure that is integrated with the international transport system in support of the Strategy for Economic Development and the State Program on Accelerated Industrial-Innovative Development; 10 (ii) ADB Strategy 2020; (iii) ADB Country Partnership Strategy (CPS)11 for 2012–2016, which supports modernizing the country’s transport and logistics system; and (iv) the newly approved CAREC Transport and Trade Facilitation Strategy 2020,12 which emphasizes a more integrated approach to improving transport and logistics infrastructure and to promoting trade facilitation. 9. At appraisal, the project DMF (Appendix 1) adopted the outcome statement and performance indicators of the investment program, instead of limiting these to the outcome of the project. At completion, the intended outcome performance indicators of the investment program

5 Decree of the President of the Republic of Kazakhstan. 2006. Transport Sector Strategy of the Republic of

Kazakhstan up to 2015. Astana. 6 ADB. 2008. Strategy 2020: The Long-Term Strategic Framework of the Asian Development Bank, 2008–2020. Manila.

7 Central Asia Regional Economic Cooperation. 2007. CAREC Transport and Trade Facilitation Strategy. Manila.

8 The construction designs were based on the engineering road surveys conducted in May and June 2008. The design

used the same design parameters that were developed for the tranche 1 roads following the Soviet construction norms and regulations (SNiIP, GOST), harmonized with the American Association of State Highway and Transportation Officials and British standard for concrete pavement in cold climates. The cost estimates were verified and compared with the actual bid prices obtained for roads with similar design in the first two projects under the investment program.

9 The government road development plan for 2006–2012 has been revised as the Transport Sector Program for

2010–2014, which was approved in July 2010. 10

Government of Kazakhstan. 2010. Transport Sector Program, 2010–2014. Astana (approved in July); Government of Kazakhstan. 2010. The 2020 Strategy for Economic Development. Astana (approved in February); and Government of Kazakhstan. 2010. State Program on Accelerated Industrial-Innovative Development. Astana (approved in March).

11 ADB. 2012. Country Partnership Strategy: Kazakhstan (2012–2016). Manila. There was no Country Strategy and Program or Country Partnership Strategy between 2006 and 2012 for Kazakhstan.

12 ADB. 2014. CAREC Transport and Trade Facilitation Strategy 2020. Manila. This was endorsed by all 10 CAREC countries at the 12

th CAREC Ministerial Conference, held in Astana, Kazakhstan, in October 2013.

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were achieved by the project. The completed road sections increased average traffic volume, reduced average travel time, reduced vehicle operating cost (VOC),13 reduced the road crash rate (paras. 38–40, and 57), and provided benefits to more than 20,000 road users. B. Project Outputs

10. The project 14 involved building 117.7 km of roads in Kazakhstan’s Zhambyl Oblast. Of these 117.7 km, ADB’s portion, known as Tranche 3, covers 97.7 km: (i) 80 km of new road connecting Otar to Blagoveshchenka at Km 162–260; (ii) rehabilitation of 10.3 km of a two-lane asphalt concrete road; and (iii) 7.4 km of new two-lane asphalt concrete road to the Kyrgyz border at Karasu. JICA covered 20 km of construction on the Kulan Bypass at Km 383–404. Appendix 3 provides the summary engineering design. 11. The works for the 117.7 km in road sections were all completed in November 2014, within budget and meeting the international roughness index (IRI) requirement of less than 3 m/km as designed at appraisal. There were minor variations to the engineering design in response to unanticipated developments and requirements. Taking-over certificates were issued to all contracts upon the approval of the engineer and the working commission, after works were substantially complete. 15 Performance certificates will be issued to the contractors after the engineer accepts the quality of the completed roads with all defects rectified, at the end of the 730-day defects notification period (DNP) (Appendix 4).

(i) Kulan Bypass (Km 383–404, 20 km). The existing 5.2-km road was upgraded to a four-lane cement concrete road, and a new 14.8-km four-lane cement concrete bypass road was constructed. Five minor variations (including additional cattle crossings), which cost 1% of the accepted contract amount (ACA), were implemented on time to provide more benefits to road users and communities along the project road. The road works were substantially completed on 23 October 2013, and defect rectification ended on 20 November 2015 (Appendix 4).

(ii) Otar–Blagoveshchenka (Km 162–260, 80 km). A new 80-km road was constructed at Km 162–260 with one-way, two-lane asphalt concrete pavement from Otar to Blagoveschenka. A four-lane embankment was included to facilitate future upgrades. 16 The road construction was extended for 11 months because of 10 necessary contract variations, including road realignment to avoid a burial site. There were minimal total cost variations at 7% of the ACA, and the overall technical specifications were achieved. Variations provided additional advantages to road users and communities along the project road. The works were substantially completed on 6 November 2014. The DNP will end by November 2016 (Appendix 4). After construction was complete on the ADB-financed road section,

13

Since the data on the transport cost for freight is not available, the vehicle operating costs were calculated, comparing with and without project and without project scenarios.

14 The project has no soft component.

15 The working commission consisted of representatives from the Committee of Roads, Zhambyl Zhol Laboratory, KazavtoZhol Zhambyl division, Kazakhavtodor Zhambyl, contractors, and the project engineer. This commission inspected the quality of completed roads compared with technical specifications, and identified defects to be rectified during DNP.

16 It was envisaged, at appraisal, that ADB financed the four-lane embankment and the pavement of the 80-km one-way two-lane road section from Otar to Blagoveschenka. The pavement of the two-lane road section on the opposite traffic direction, from Blagoveschenka to Otar, was planned for future construction. After project completion, the government is financing this two-lane Blagoveschenka–Otar road section. The construction of the first 40-km road section is ongoing. Procurement of works is ongoing for the second 40-km stretch.

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construction began on the government-financed portion of the one-way, two-lane section from Blagoveschenka to Otar (see footnote 17).

(iii) Korday to the Kyrgyz border at Karasu (Km 0–17.7, 17.7 km). The existing 10.3-km two-lane asphalt concrete road was rehabilitated and a new 7.4-km, two-lane asphalt concrete bypass road was constructed. The road works were extended for 13 months as a result of six contract variations (such as construction of truck parking lot at Karasu gate) amounting to 12% of ACA. The completion date was also extended because the contractor had financial constraints. Overall, the technical specifications were achieved, providing more benefits than originally envisaged to road users and communities along the project road. The works were substantially completed on 26 November 2014. The DNP will end in November 2016 (Appendix 4).

C. Project Costs 12. At appraisal, the total project cost was estimated at $281 million: $243.03 million (86.5%) for civil works, $6.87 million (2.4%) for consulting services, and $31.10 million (11.1%) for contingency. ADB provided $173 million to finance the 97.7-km road section and construction supervision services, while JICA provided ¥6.36 billion (an amount equivalent to $68 million) to finance a 20-km road section. ADB administered the JICA-financed section under the Accelerated Cofinancing Framework Agreement. The Government of Kazakhstan provided counterpart funds of $40 million. No cost on interest during construction was included in the project cost, as agreed. The cost by component, and the financing plan are in Appendix 5. 13. During project implementation, the contingency funds were reallocated to civil works to finance contract variations and cover escalating costs of road construction materials, as indicated in the works contracts. 14. The project cost was adequate to finance works and the services of the construction supervision consultant (CSC). At completion, the project cost was $269.31 million, 4% less than envisaged at appraisal in nominal terms. The uncontracted amount for works and the contingency funds were sufficient to fund several minor technical variations and price escalations. The cost for all contract variations registered at 6% of ACA of all three works contracts (para. 11, i–iii) while the price escalation17 on construction materials reached 40% of ACA for all three works contracts (Appendix 4). Despite the contract variations and price escalations, the economic internal rate of return (EIRR) at project completion was favorable compared to at appraisal, mainly due to a higher volume of traffic at opening, compared to what was envisaged (paras. 18 and 44). D. Disbursements

15. The disbursement of ADB and JICA loan proceeds followed ADB’s Loan Disbursement Handbook (2007). A direct payment procedure was applied for works and consulting services contracts. An imprest account was not required.

17 All construction prices—including labor, fuel, gravel, cement, bitumen, and steel—increased over time. Among these

materials, labor (65% increase) and fuel (40% increase) registered the highest increases from their base prices in 2010 to 2013. Labor and fuel contributed the largest amounts to the total price escalation. Price indices were sourced from the Statistics Agency of Kazakhstan.

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16. MOTC established a financial unit within COR in June 2009 for the investment program and assigned qualified staff to facilitate prompt disbursements in coordination with Ministry of Finance (MOF) and ADB. eStar18 was used to upload applications for loan withdrawals from August 2011 onwards, which sped up payment processing. COR’s access to the ADB Loan Financial Information System website assisted its staff in monitoring the disbursement achievement against projections. 17. The loan disbursement was delayed as loan effectiveness (seven months after loan approval in November 2010), contract award (two months after loan effectivity), and commencement of works contracts (three months after contract award) were all late. In 2011, the project had a performance rating of potential problem because of these delays. The loan disbursement began in December 2011 with an advance payment and progressed smoothly until loan account closing, earning an on track project performance rating. 18. Loan 2697 (ADB loan) was expected to close on 31 December 2013. At the government’s request, the loan period was extended to 31 December 2014 to accommodate completion of additional works (para. 11, ii–iii; and Appendix 4). The loan account for Loan 2697 (the ADB loan) was closed on 22 April 2015, with total disbursements of $164.67 million (95% of net amount) and savings of $8.33 million that were cancelled at closing. Loan 8251’s (the JICA loan) closing date is 31 July 2020 following the loan agreement. The loan account was closed on 1 August 2016 as agreed by MOF and JICA since construction is complete and the contractor has been fully paid. Total disbursements under reached $68.33 million (97% of the net loan amount of $70.72 million) and savings of $2.39 million were cancelled at closing. Annual disbursements of the loan proceeds are in Appendix 6. E. Project Schedule

19. The ADB loan agreement was signed as scheduled on 15 December 2010, days after loan approval took place on 15 November 2010. The loan was expected to be declared effective 60 days after loan signing, but effectivity was postponed twice because of lengthy procedures to ratify the loan agreement in parliament. In total, it took about seven months from loan approval to loan effectivity (paras. 17 and 19). The ADB loan was declared effective on 15 June 2011, with loan closing scheduled for 31 December 2013. 20. The JICA loan was planned to cofinance Project 2, but JICA chose to postpone it to Project 3. Since JICA project preparations had begun for Project 2, the JICA loan was approved on 31 May 2010, six months before the ADB loan. The loan agreement was signed on 23 August 2010 after JICA completed its due diligence. The loan effectiveness was delayed for about 14 months after the loan approval date as the government needed to fulfill JICA’s conditions for loan effectivity.19 The JICA loan was declared effective on 15 July 2011, a month after the ADB loan was declared effective. The loan closing date is 15 July 2020, as stipulated in the JICA loan agreement. 21. At appraisal, the works contracts were expected to be awarded by December 2010 and completed by 30 June 2013 with a 730-day DNP. During implementation, the works contracts for Km 383–404 and Km 162–260 were awarded in August 2011. Works on these two sections began

18

eStar stands for Electronic Storage and Retrieval. It is an electronic document repository and sharing system for ADB documents.

19 JICA loan conditions included effectivity of the ADB loan, provision of evidence of authority, presentation of a specimen signature, and confirmation of the legal opinion and exchange of notes.

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in November 2011. The contract for the third lot (from Korday to the Kyrgyz border at Karasu) was awarded in November 2011—five months after ADB loan effectivity—and works began in January 2012. 22. The works contract was planned to last two years. The works at Kulan Bypass (Km 162–260) were completed on time in October 2013 (para. 11, i), and the DNP ended in November 2015. Works on the Otar–Blagoveschenka (Km 383–404) road section were extended for 11 months as additional works were needed (as described in para. 11, ii). Works on that section were substantially completed in November 2014, with the DNP ending in November 2016. Works on the road section from Korday to the Kyrgyz border at Karasu were extended for 13 months as additional works were needed (para. 11, iii), and substantially completed in November 2014, with a DNP ending in November 2016. 23. The delay in completing the works for these two road sections, combined with the delays in declaring ADB loan effectivity, awarding the contract and mobilizing the works, resulted in a one-year extension of the project implementation period but no additional cost (paras. 12–14). At completion, the quality outputs were delivered as envisaged at appraisal, with incremental benefits, such as additional crossings for livestock and agricultural machinery. The project implementation schedule is in Appendix 7 and a chronology of major events is in Appendix 8. F. Implementation Arrangements

24. MOTC was assigned as the executing agency at appraisal, with COR as its implementing agency. COR’s deputy chairman was appointed as the project director, with assistance from (i) selected COR staff with expertise in engineering, finance, legal, and procurement; (ii) the Zhambyl Oblast Road Department, representing COR in the field sites to ensure smooth project implementation; (iii) the Zhol (road) laboratories to monitor laboratory test results related to road construction; (iv) the project management consultant (PMC) engaged under the first project of the investment program to assist in managing the project; and (v) the CSC that administered contracts and supervised the works’ progress, quality, and timeliness. 25. KazAvtoZhol JSC20 became involved during project implementation in 2013 on instruction from the COR Chairman to provided technical support to the COR. Later in 2014, its role was limited to monitoring safeguards compliance, and the Zhol (road) laboratory was appointed COR’s representative in the field. The government reorganized on 6 August 2014 and established the Ministry of Investment and Development (MID),21 which absorbed the MOTC’s functions. COR remained the implementing agency22 until project completion. Appendix 9 shows the project’s institutional arrangement at appraisal and at completion.

20

KazAvtoZhol JSC was established in February 2013 as the national road operator. On 27 October 2015, the law on the national road operator was amended declaring KazAvtoZhol JSC as the sole operator for the (i) repair and maintenance of national highways, as well as project management; and (ii) development of road infrastructure (http://kazautozhol.kz/).

21 Decree of the President of Kazakhstan No. 875. 2014. Reform of the Public Administration System of the Republic of Kazakhstan. Kazakhstan. The newly formed Ministry of Investment and Development (MID) is responsible for industrial-innovative, scientific and technological development of Kazakhstan. It took over the functions of the abolished MOTC, the Ministry of Industry and New Technologies, the Agency for Communication and Information, and the National Space Agency (Kazcosmos).

22 As advised by the Office of the General Counsel on 16 September 2014, there was no need to formally amend the Loan Agreement as the definition of MOTC included any successor, in this case the MID.

7

G. Conditions and Covenants

26. The details of compliance with the covenants are in Appendix 10. No conditions or covenants were modified, suspended, or waived. All covenants were complied with, except for two partly complied with, and one not complied with. The covenants relating to project implementation were all complied with, except for one partly complied with—the CSC was not mobilized prior to commencement of works, but a representative from Zhambyl Oblast CoR served as an interim engineer until the CSC was on board (para. 29). COR committed to continue complying with the covenant involving the monitoring of road crash rate and traffic during project road operation beyond DNP. The covenants relating to safeguards, social and anti-corruption were all complied with. The financial covenants were all complied, except for (i) one partly complied—the CSC missed to submit the project performance monitoring system (PPMS) report, but was able to comply with all monthly and quarterly progress reports and environment monitoring reports; and (ii) one not complied with—the project performance audit was not carried out as the review missions, quarterly and monthly progress reports, safeguards monitoring reports, and annual financial audit reports, together with eOps project performance indicators, helped to monitor the project performance. 27. The loan took effect seven months after ADB approval because of lengthy government procedures on loan signing and effectiveness, as seen in other ADB projects in Kazakhstan. The loan closing date was extended for one year (without changes in repayment schedule) to allow road works to finish (para. 23).

H. Consultant Recruitment and Procurement

28. At completion, the project contract packages listed in Appendix 4 were procured as planned at appraisal. ADB approved advance contracting to start procurement of works and consultant recruitment activities prior to loan approval. The advance contracting notice was posted on 20 May 2010 on the ADB website. This was followed by advertising invitations for bid in September 2010 and consulting services recruitment notices in December 2010. 29. CSC recruitment used a quality- and cost-based selection method with a standard quality-cost ratio of 80:20, following the ADB Guidelines on the Use of Consultants (2007). During the preparation of the consultant terms of reference (TOR), the project team ensured that the TORs included a design review task and requirements for reporting (particularly on safeguards compliance) as indicated in the loan covenants. Despite advance contracting, the contract was awarded in April 2012, 10 months after loan effectiveness. Consultant recruitment was delayed because of a prolonged and incomplete submission of list of shortlisted firms; inadequate assessment of expressions of interest; prolonged submission of technical evaluation proposal report; reevaluation of proposals as only two of the six shortlisted firms were technically qualified; a need to clarify potential conflicts of interest; and lengthy contract negotiations because of tax issues. 23 COR, as agreed with ADB, appointed a representative from Zhambyl Oblast COR to serve as the interim project engineer to reduce delays in issuing notices to commence to contractors.

23

The proposed list of shortlisted firms was submitted 83 days after CSRN completion; and its approval took another 86 days due to several missing information, missing attachments, inappropriate templates, and inadequate expressions of interest assessment. The technical evaluation report was submitted 213 days after the issuance of the request of proposals to the shortlisted firms. Moreover, the technical proposals were reevaluated, and the technical evaluation report took three rounds of reviews. The timeliness and quality of submissions were affected when the team leader of the project management consultant (engaged under Project 1) was being replaced.

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30. The procurement of works followed ADB’s Procurement Guidelines (2007). Works contracts over $3 million were procured using international competitive bidding (ICB) from a list of post-qualified bidders. ADB’s prior review procedures were followed. The contracts incorporated relevant sections of ADB’s Anticorruption Policy (1998) and SPS (2009), as well as road safety features and relevant loan covenants. There were three works contracts. The works contracts for Kulan Bypass and Otar–Blagoveshchenka road section were awarded in August 2011 (para. 21). Review of the bid evaluation report (BER) took considerable time because it contained information gaps and had to undergo several rounds of review, which required the extension of the bid and bid security validity on two occasions.24 The contract award for the road section from Korday to the Kyrgyz border at Karasu was further delayed as there was an extensive deliberation on whether to rebid this lot. The three lowest bidders failed to meet the qualification criteria;25 the fourth lowest bidder was qualified but bid 70% above the engineer's estimate. COR requested that all seven bidders extend their bids and bid security validity periods. Of the seven bidders, only one extended its bid and bid validity period: the second lowest bidder, which failed to submit a power of attorney. COR submitted a separate BER for Lot 3 for ADB’s endorsement. The works contract for this road section was awarded to the second lowest bidder26 in November 2011. I. Performance of Consultants and Contractors

31. Consultant. The CSC’s overall performance was rated less satisfactory. The consultant carried out the key tasks indicated in the TOR, including (i) reviewing detailed design; (ii) administering the three civil works contracts; (iii) controlling the contractor’s work quality; (iv) ensuring timely completion of works; (v) monitoring implementation of the environmental management plan and LARP; (vi) monitoring traffic safety during implementation; and (vii) preparing the required reports (monthly and quarterly progress reports, biannual EMRs, biannual social monitoring reports, works completion reports, and a traffic management plan). In its detailed design review, the CSC identified key areas for contract variations, such as soil unsuitable for an embankment and the need to relocate a gas pipeline. The consultant had a good relationship with the contractors and other stakeholders, submitted the reports and variation orders, and addressed the safeguards issues in collaboration with the Community Liaison Group (CLG) coordinator (para. 56) and COR social development expert. However, the consultant had changes in the team of experts (three out of seven international experts and 11 out of 15 national experts were replaced for various reasons, including health, family, and personal issues). Team changes affected timely submission of project progress and safeguards reports and efficient monitoring of works quality and progress. Furthermore, the consultant missed to submit the PPMS report. 32. Contractors. Overall, the performance of the three contractors was satisfactory. All contractors fulfilled the obligations under their respective contracts (para. 11) and completed the road works following the original engineering designs with technical variations. They constructed quality roads, with IRI below 3m/km. All contractors implemented the environmental mitigation measures stipulated in their contracts and effectively implemented traffic

24

The delay in completing the bid evaluation was a result of weak performance by the project management consultant, who was engaged under Project 1 of the investment program to assist the COR in managing the investment program and all its projects, including procurement and recruitment activities.

25 The lowest bidder failed to demonstrate the experience in a similar project and in key activities. The second lowest bidder failed to submit the power of attorney as originally required. The third lowest bidder failed to meet the specific construction experience in similar project and its bid was not signed by an authorized person.

26 The ADB’s Procurement Committee concluded that there was no need for a power of attorney since the General Director signed the bid on behalf of the company. The company charter established company’s General Director as authorized to act on the company’s behalf without a power of attorney.

9

safety management plans and camp site safety measures. ZholKyrylys LLP (KAZ) the contractor for the 20-km Kulan Bypass, completed works on time and the DNP is complete (para. 11, i). Cengiz Insaat (TUR), the contractor for the new 80-km Otar–Blagoveshchenka road section, completed construction with an 11-month extension to complete several minor technical variations (para. 11, ii). Akmola LLP, the contractor for the 17.4-km road section from Korday to the Kyrgyz border at Karasu, completed works with a 13-month extension because of technical variations and cash flow problems (para. 11, iii). As of August 2016, Cengiz Insaat and Akmola LLP were rectifying minor defects as part of the DNP. J. Performance of the Borrower and the Executing Agency

33. The performance of the borrower (the Government of Kazakhstan, represented by MOF), the EA (MOTC, now MID), and the implementation agency (COR) was satisfactory overall, despite lengthy governmental procedures to declare loan effectivity (paras. 19 and 27). The government reorganization in August 2014, which changed the EA from MOTC to MID, did not affect project implementation as COR kept its role as the implementing agency (para. 23). MOF, MOTC/MID, and COR complied with all loan covenants during project implementation, including ensuring that counterpart financing was adequate and available as required. MOF requested that the repayment schedule remain unchanged when the loan closing date extended by a year (para. 27). COR implemented a financial management system and maintained separate records for ADB and JICA loans, as the annual audit reports confirmed. 34. COR implemented the project following (i) ADB’s guidelines on safeguards, anticorruption, disbursements, procurement of works, recruitment of consultants, and management of consultant contracts; and (ii) guidance from the International Federation of Consulting Engineers (FIDIC) on management of works contracts. COR has been implementing ADB-financed projects (tranches 1 and 2 of the investment program) and other projects that used international financing along CAREC Corridor 1, which provided needed experience in managing externally-funded projects. Well-established day-to-day communication with the ADB project team facilitated implementation and enhanced project management and problem-solving.27 COR effectively chaired the CLG, which was responsible for the project’s grievance redress mechanism (para. 55). K. Performance of the Asian Development Bank

35. ADB’s performance was satisfactory. Teamwork between ADB Headquarters and Kazakhstan Resident Mission facilitated effective project preparation, implementation, and completion. ADB collaborated with the MOF and MOTC to strengthen project readiness through preparing due diligence reports on safeguards and economic analysis. During project implementation, ADB provided substantial and timely support to MOTC/MID and COR by (i) providing guidance in resolving implementation issues, either technical or safeguards; (ii) promptly responding to requests to reallocate loan proceeds, which resulted in full utilization of the loan proceeds; (iii) quickly reviewing contract variations so as not delay work progress; (iv) promptly uploading withdrawal applications through eStar for faster disbursements; (v) timely extension of the loan closing date at the government’s request; and (vi) coaching their staff on ADB guidelines on procurement, consultant recruitment, project administration, contract administration, disclosure, and disbursements, as requested.

27 COR’s involvement in other initiatives implemented under TA 7433

27 (mainstreaming land acquisition and resettlement

in Central and West Asia) and TA 754827

(improving environmental safeguards) helped improve its understanding of ADB policy and enhanced its capacity to manage safeguards complaints.

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36. ADB monitored the implementation progress and resolution of issues through missions, project progress and safeguards reports, and video/teleconferencing. ADB fielded 16 review missions (including midterm, special project administration reviews, and safeguards) and carried out site visits with Zhambyl Oblast COR officials. In general, the communication and coordination among ADB, MID, and COR were smooth and effective. 37. Teamwork between ADB and JICA also facilitated effective project preparation, implementation, and completion. JICA joined the consultation mission in February 2010 to discuss the scope and financing arrangements among the government, JICA, and ADB. Following an Accelerated Cofinancing Framework Agreement, ADB, as the loan administrator, carried out project appraisal, procurement review, disbursement review, and other elements of project administration (such as conducting missions, reporting and monitoring on project progress, and completion). ADB provided updates to JICA on the project progress, reallocation of loan categories, and contract variations. Upon ADB review and endorsement of the claims, ADB submitted to JICA the required documents so JICA can release the payments. In general, the communication and coordination between ADB and JICA was smooth and effective.

III. EVALUATION OF PERFORMANCE

A. Relevance

38. The project was rated relevant at both appraisal and completion. The project addresses poor road network coverage, poor quality of road assets, impassable roads in winter, road safety issues, and other transport issues (para. 5). The project objective of contributing to develop an efficient transport system in Zhambyl Oblast to boost international trade and regional cooperation among neighboring countries is aligned with (i) the government’s transport sector strategies, which prioritized improvement in the Republic road network; (ii) ADB Strategy 2020 and ADB’s Country Partnership Strategy (CPS); and (iii) the CAREC program (paras. 5 and 8). 39. The design was unchanged from appraisal to completion and was adequate to attain the project’s intended outputs and objective. There were minor variations in works during implementation (para. 11)—including additional guardrails, sheltered bus stops, and crossings for cattle and agricultural machinery—which increased project benefits to all road users and therefore, also enhanced the project’s relevance. Various stakeholders were involved during preparation, implementation, and completion of the project (paras. 6–7, 24–25, 31–37, 39, and 50–55). 40. There was a strong sense of government ownership over the project. COR commissioned the project engineering design (para. 6), monitored the project progress, visited the project sites during implementation, and assessed the quality of the roads before taking over road operations (para. 33). The representatives of the Zhambyl Zhol laboratory and Kazakhavtodor monitored the rectification of defects and inspected the project roads during DNP. The KazAvtoZhol JSC, a national agency under a statute, will take over operations and maintenance after the DNP ends (para. 48). B. Effectiveness in Achieving Outcome

41. The project was effective in achieving the outcome intended at appraisal. The addition of 117.7-km roads with reduced roughness (para. 11) provided the benefits as envisaged at appraisal (Appendix 11). The new roads resulted in reduced kilometer distance of travel from Otar to Blagoveschenka by 20 km and from Korday to Kygyzstan border by 2.5 km. The new roads and upgraded road sections resulted in reduced travel time, reduced VOC and

11

improved road safety. In Kulan, local residents report that travel time has dropped from 10 hours to 6 hours on the Otar–Blagoveschenka–Kulan stretch (para. 52). For the three road sections, the economic reevaluation shows a 37% reduction in travel time cost, comparing the with-project and without-project scenarios. VOC/km28 for freight vehicles is at least 16% lower than it was before the project was built. With installed safety equipment (such as guardrails and median strips) and road signage, the road crash rate has dropped. Police data from 2015 shows that road crashes fell 50% from 0.3 fatality/km to 0.16 fatality/km in 2015 (or 5.9 fatalities per 100 million vehicle-kilometer). 29 Additional roadside facilities, such as 21 gender-sensitive toilets, 30 18 sheltered bus stops, and rest areas provide further convenience to road users, particularly long-distance truck drivers and bus passengers. More than 20,000 road users have benefited the roads in the year they have been in operation (Appendix 1). 42. Traffic has significantly increased with the road improvements. The annual average daily traffic (AADT) for the project reached 7,21231vehicles per day (vpd) in 2015 as compared to 3,982 vpd at appraisal (Appendixes 1 and 11). One additional benefit is the increase in cargo volume at the Karasu border crossing with the Kyrgyz Republic (Appendix 1). Cargo volume32—which was not calculated during appraisal but estimated at completion—was at 393,155 tons per year in both directions in 2010. This figure quadrupled to 1,714,812 tons in 2014, although it dropped to 910,707 tons in 2015, due partly to the significant tenge devaluation. The construction of the road toward Karasu, including construction of a parking area for trucks near the Karasu border gate, may have contributed to the increase in the cargo volume. The lifting of customs controls at all Kazakhstan–Kyrgyz Republic border crossing points (including Karasu) effective 12 August 2015 is likely to further increase border traffic at Karasu and all ADB-financed roads along CAREC Corridor 1.33 C. Efficiency in Achieving Outcome and Outputs

43. The project was efficient in achieving its intended outputs and outcome. All outputs were achieved as designed at appraisal (para. 11 and Appendix 11). The ADB loan closing date was extended by a year to accommodate minor unanticipated variations in works, which provided additional benefits to road users (paras. 11 and 39). The loan amount was sufficient to complete the project outputs, with loan savings of $8 million for ADB loan and $2 million for JICA loan (para. 18). CLG was efficient in resolving safeguards-related issues (paras. 34 and 55). COR was efficient in resolving technical issues together with the engineer and the contractors. COR and ADB effectively and efficiently resolved project implementation bottlenecks, including the need to relocate a gas pipeline and provide rights of way for archeological monuments. All outcome indicators were achieved as envisaged at appraisal, including travel time savings, reduced road crashes, increased traffic, and reduced VOC for freight vehicles (paras. 41–42). Other benefits were observed, such as increased cargo volume at the Karasu border crossing and more businesses such as gasoline stations, cafés, and shops along the project road.

28

Vehicle operating cost was used to replace the indicator on transport cost for freight as data are not available. 29

As the police data on road crashes were based on a single year, the fatality/km measurement should only be seen as indicative of the reduction of road crashes. The new roads shorten the distance of travel by 20 km at Otar–Blagoveshchenka and 2.5 km at Korday–Kyrgyz border, and thereby reduce the absolute volume of road crashes.

30 Gender-sensitive toilets refer to toilets with gender segregation and locks on doors for personal safety.

31 AADT is based on the 2015 traffic counts for the three road sections provided by COR in April 2016.

32 The data source on the cargo volume that crossed the Karasu border crossing point is the Kyrgyz Customs Authority.

33 The akimat of Korday raion mentioned this development during the ADB project site visit in October 2015. News at http://eec.eaeunion.org/en/nae/news/Pages/8967856.aspx.

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44. To assess project efficiency, the EIRR was re-evaluated using updated data34 but with the same methodology adopted at appraisal (Appendix 12). The economic costs and benefits were compared between the with-project and without-project scenarios. The economic benefits considered in the reevaluation were the same as those at appraisal: (i) VOC savings, (ii) improvements in travel time, and (iii) reduction in road crash costs. The re-evaluated EIRR was 23.3% for the three road sections combined: 13.5% for the Kulan Bypass, 45.0% for the Korday–Karasu section, and 25.1% for the Otar–Blagoveschenka section. The recalculated EIRRs exceed the benchmark rate of 12%, demonstrating that the project is economically viable. The EIRR was higher than at appraisal (16.6%) because more traffic used the road than expected and construction costs came in under budget. The sensitivity analysis results35 showed that the project remains economically viable with the EIRR exceeding the 12% threshold in all scenarios of a 25% reduction in any of the three benefits, or the full exclusion of road crash cost savings. D. Preliminary Assessment of Sustainability

45. The project is likely to be sustainable. 46. Road Safety. The road sections were designed to improve safety by eliminating any hazardous curves and by improving road geometrics. Road markings, traffic signs, traffic signal controls at junctions, lights and other improvements to road safety were installed. In addition, rest areas and bus stops with gender-sensitive toilets were installed. These facilities and regular road safety audits will contribute to the sustainability of road safety over time. 47. Axle-Load. The pavement was designed for an axle-load of 13 tons, compared to the Kazakh government regulation36 of 10 tons per axle. Axle-load monitoring and enforcement is in place. To monitor the axle-load, there are (i) three special automated measuring devices (one in Merke and two in Almaty); and (ii) one transport control post in Aktai, Kazylorda—all along the CAREC Corridor 1.37 MID strictly enforces the axle-load regulation of 10 tons per vehicle. Design and enforcement mechanisms will minimize road surface deterioration over time. 48. Road Maintenance. KazAvtoZhol JSC, 38 through a statute of 27 October 2015, was declared the sole operator to build and maintain the 24,000-km-long national highway network. KazAvtoZhol JSC is expected to be fully self-financing by 2022, through tolling 7,000 km in major highways. KazAvtoZhol JSC’s business plan shows that it will toll 3,500 km of national highways, including 2,500 km of CAREC Corridor 1. The completed Project roads are primary candidates to become toll roads. Allocation from the state budget for road maintenance is likely to be needed in parallel to the toll system revenue. Projected annual revenue from tolled sections of CAREC Corridor 1 is at KZT 8.5 billion ($25 million), or $10,000 per km. Although such revenue will be sufficient to maintain tolled sections, and contribute to maintenance on untolled national highways, the government has been providing substantial allocation for road maintenance.39 If KazAvtoZhol

34

The economic analysis at both appraisal and re-evaluation was carried out using the Highway Development and Management model.

35 One scenario in the sensitivity analysis is the exclusion of the road safety savings. Road safety savings were estimated by assuming a reduction of the fatal and personal injury casualty rates once the project roads are upgraded, since updated data at completion were not available.

36 MID Minister Order No. 342 of 26 March 26 2015 on the permissible parameters of vehicles intended for movement on highways of the Republic of Kazakhstan.

37 Source of load measuring devices: http://transport.mid.gov.kz/en/kategorii/dislokaciya-postov-transportnogo-kontrolya.

38 KazAvtoZhol JSC was established in 2013. Its official website is at http://kazautozhol.kz/.

39 In 2013–2015, the government allocated KZT37.6 billion for road maintenance.

13

JSC is not fully self-financing on this schedule, the government will supplement funds for road maintenance. 49. KazAvtoZhol staff have technical expertise on road development, construction, and maintenance. Most staff are from the oblast CORs, Zhol laboratories, Kazahavtodor, or other local private road maintenance firms. There are existing road maintenance depots at Korday, Merke, and Otar near the project site and others at Aksuyek, Akyrtobe, Shu and Taraz in Zhambyl Oblast—along CAREC Corridor 1, which are currently being managed by Kazakhavtodor. With the institution, staff expertise, funds, facilities, and quality pavement in place, the project roads are likely to be sustainable. E. Impact

50. The project impact is significant based on the initial contribution to regional cooperation and local economy. 51. Regional Economic Impact. The impact intended at appraisal is likely to be achieved. Improved roads will stimulate trade between Kazakhstan and its neighbors—such as the PRC, Kyrgyz Republic, the Russian Federation, and Uzbekistan—along CAREC Corridor 1. The constructed project road toward Karasu with the truck parking area near the border gate may have contributed to the increased cargo volume at the Karasu border crossing with the Kyrgyz Republic (para. 42). The lifting of customs controls at all Kazakhstan–Kyrgyz border crossing points (including Karasu) in August 2015 is likely to have further increased border traffic (and hence, increased cargo volumes) at the Karasu and increased transit traffic in other ADB-financed roads along the CAREC Corridor 1 going to other neighboring countries. 52. Socioeconomic Impact. The project impact was positive. During the ADB project completion review mission in October 2015, local government authorities and residents confirmed that the project roads have improved (i) travel convenience; (ii) access to markets, social service facilities, and business areas in Almaty, Korday, Merke, and Taraz; and (iii) employment opportunities and income. In Turar Ryskulov raion in Kulan, residents said travel time in Otar–Blagoveschenka–Kulan stretch had fallen from 10 hours to six hours and that road safety and environmental conditions had improved in Kulan since cargo trucks no longer travelled on village roads (para. 41). They also said that cafés, small shops, and fuel stations at both ends of the Kulan Bypass had increased employment opportunities and incomes. In Korday raion, the akimat said that a café and a fast food restaurant had opened when the road towards Karasu and the parking area trucks at the Karasu border crossing, and that additional local businesses were planned along the project road. Along Otar–Blagoveschenka road, drivers, and passengers described increased comfort in travelling because of smoother pavement and the construction of rest areas, bus stops, and gender-sensitive toilets along the road (para. 41). 53. Construction on the three road sections between 2011 and 2014 provided employment opportunities and income to local residents. The project directly employed about 1,821 local personnel and workers.40 Construction aggregates (crushed rocks, sand, and gravel) and supplies were procured locally, generating employment and income in the local market. The project also generated rental income from temporary use of land for base camps, storage areas, and other construction activities.

40

The number of employed local personnel and workers were based on contractors’ records.

14

54. Environment Impact. The project was classified environment category A at appraisal. MOTC prepared an environmental impact assessment (EIA) for each of the three road sections. The EIAs identified environmental impacts related to pollution (air, water, and noise), flora and fauna, and archeological and burial sites in the project’s right-of-way. No environmental impacts were found to be significant. Mitigation measures set out in the EIA and the site-specific environmental management plans (EMPs) were fully complied with during construction. The CSC prepared four environmental monitoring reports that recorded all the environmental issues, but indicated no significant negative impacts during implementation. At completion, local authorities recorded no residual impacts and people living along the project roads reported no grievances. The final environmental monitoring report confirmed that the site cleanup and restoration on the Kulan Bypass and the Korday–Karasu road section were satisfactory. The project facilities in Otar–Blagoveschenka road section were not restored as they are currently being used to build the government-financed, one-way Blagoveschenka–Otar road section. Construction on this section started after completion of the ADB-funded component. The EIAs and the four environmental monitoring reports were disclosed on the ADB website. Appendix 13 provides details of the environmental activities. 55. Land Acquisition and Social Safeguards Impact. The project was classified as category B for involuntary resettlement at appraisal. MOTC prepared the draft land acquisition and resettlement plan (LARP), which initially identified affected people and a total land requirement. Minor adjustments were made after the Regional Department of Roads (MOTC) verified the data. The LARP was further updated during project implementation to reflect the additional affected households. A LARP due diligence report was prepared because 16 containers at the Kainar interchange needed to be moved to a new location. The government took the responsibility for timely delivery of entitlements and compensation to affected people. KZT294,527,207 was allocated from the state budget to pay for the compensation and relocation of 107 verified affected people, which included 98 households and 9 legal entities. The required total permanent land involved 530.44 ha of land (527.18 ha agricultural land and 3.26 ha commercial land). The akimat provided the land for the 16 containers. At completion, all resettlement activities were satisfactory. The LARPs, external LAR compliance report, and four internal LAR compliance monitoring reports were posted on ADB website. Appendix 13 provides detail on resettlement activities. 56. The Community Liaison Group (CLG) was formed and was effective in addressing safeguards issues as well as works-related issues (Appendix 13).

IV. OVERALL ASSESSMENT AND RECOMMENDATIONS

A. Overall Assessment

57. The project is rated successful (Appendix 14). It was designed, implemented, and completed as conceived. It is relevant to the government’s transport sector programs, country’s development strategies, ADB’s CPS, and the CAREC program (paras. 38–40). The three road sections have contributed to improving transport efficiency in Zhambyl Oblast along CAREC Corridor 1 (paras. 41–42) through reduced travel time, reduced VOC, and reduced road crash rate. It is rated economically viable (paras. 43–44), and likely to be sustainable (paras. 45–49), with initial significant impact on economy and safeguards (paras. 50–56).

15

B. Lessons

58. Consultant Performance. Turnover on the consultant team hampered timely report submission and efficient monitoring of quality and progress. Consultant turnover and associated delays may have been minimized with added penalty clauses in the contracts. 59. Border Infrastructure Improvement. The truck parking area at the Karasu border crossing, which the Kazakh customs authority requested, combined with the improved road may have contributed to the increased border traffic. Improving border crossing infrastructure and facilities could be included in the project at appraisal, as appropriate, for increased project benefits. 60. Detailed Engineering Design. There were no substantial changes to the overall project design. Various minor changes did not aggregate to constitute a major design change. But these extended the project completion date. These changes may have been minimized with closer involvement of all related agencies (e.g. road agencies, the archeological institute, the utility companies, akimats, community in the project area and other road users) at the detailed engineering design preparation stage, in particular, from a road user perspective. 61. DMF. The project adopted the outcome statement and performance indicators of the investment program. The indicators were achieved at the project level, but should have been formulated for the project at appraisal. Moreover, measurability and data availability should be considered in selecting performance indicators on freight transport cost and road crashes (fatality/km). C. Recommendations

1. Project Related

62. Covenants. Most loan covenants adequately addressed the project implementation requirements and can be maintained in their present form. On road safety, the government should continuously conduct road safety audits, raise road safety awareness, and increase police oversight. The government should continue to support KazAvtoZhol in making the transition toward establishing more toll roads to fund overall road network maintenance. The government should consider internal changes to shorten its procedures for initiating loan effectiveness. 63. Timing of the Project Performance Evaluation Report. A mission to prepare a project performance evaluation report may be fielded at least two years after the completion of the one-way road section from Blagoveschenka to Otar, which the government has financed. This road section would be fully operational and the benefits will be better assessed at that time.

2. General

64. For future appraisals, project schedules should be prepared taking into consideration: (i) lengthy government procedures to sign loan documents and initiate effectiveness; (ii) time and resources needed for archeological studies and such other mandatory due diligence; and (iii) additional works requirements from user’s perspectives, such as crossings for cattle and agricultural machinery. Adding time contingencies for factors such as these will improve project performance.

16 Appendix 1

DESIGN AND MONITORING FRAMEWORK

Design Summary Performance Indicators / Targets

Data Sources and/or Reporting Mechanisms

Status at Completiona

Impact a Contribution to sustainable economic development

By 2020 Kazakhstan’s GDP growth by 60% from 2010 Kazakhstan’s export and import growth increased by 30% from 2010

Government statistics

GDP grew by 24.5% between

2010 and 2015 Import declined by 9.1%

between 2010 and 2015 Export declined by 26.9%

between 2010 and 2015

Outcomea Development of an efficient transport network in Zhambyl Oblast

By 2015 Increased average traffic volume to 7,000 vpd from 4,000 vpd in 2007

National, provincial, and district socioeconomic statistics from Central Statistics Office Periodic classified traffic counts and accident data Freight Forwarder Association statistics

Achieved (Project 3) AADTb for the project

increased to 7,212 vpd in 2015 from 3,982 vpd in 2010

Reduced average travel time through Zhambyl Oblast between the southern Kazakhstan border and Otar to 6 hours from 10 hours in 2009

Achieved (Project 3) • Average travel time savingsc

registered at 37% in 2015

compared to 2010

Reduced transport cost for freight to 5% of the cargo value from 10% in 2008

Achieved (Project 3) VOC savings per kilometer for

freight vehiclesd realized at 16% in 2015 compared to 2010

Reduced road accident rate to 0.1 fatality/km from 0.3 fatality/km in 2006

Achieved (Project 3) Road crash rate reduced by

about 50% from 0.3 fatality/km to 0.16 in 2015e (or 5.9 fatalities per 100 million vehicle-kilometer)

Project 3 will benefit about 8,000 people in the project area

Achieved (Project 3) More than 20,000 road users

benefited

Output By 2013 118 km of the CAREC Transport Corridor 1 in Zhambyl Oblast reconstructed

Road section from Km 383–404, Km 162–260, approach to Kyrgyz border reconstructed with IRI of less than 3 m/km

Project progress reports ADB project completion report

Achieved. 117.7-km road sections reconstructed with an average IRI of less than 3 m/km

Appendix 1 17

Activities with Milestones 1. Construction supervision consultant recruited

and its services commenced by December 2010

2. Civil works contracts awarded by December 2010

3. Civil works completed by 30 June 2013

Inputs at Appraisal ADB Loan: 173.00M(OCR) JICA Loan: $68.00 M

($-equivalent) Government: $40.00 M Total: $281.00 M

Actual Inputs ADB Loan: $164.67M(OCR) JICA Loan: $ 68.33 M

($-equivalent) Government: $36.31 M Total: $269.31 M

AADT = annual average daily traffic, ADB = Asian Development Bank, GDP = gross domestic product, hr = hour, IRI = international roughness index, JICA = Japan International Cooperation Agency, km = kilometer, m = meter, M = million, OCR = ordinary capital

resources, vpd = vehicles per day. a

The outcome statement and indicators are for the entire investment program. Achievements at completion refer to those of the project only.

b Raw traffic counts provided by COR through its letter of 13 April 2016.

c Travel time savings were calculated, comparing with and without scenarios.

d Since the data on the transport cost for freight is not available, VOC savings per kilometer for freight vehicles were calculated, comparing with and without scenarios.

e As the data was based on a single year, this measurement should only be seen as indicative of the reduction of road crashes. The data was sourced from 2015 police report on road crashes, which included those under the three project road sections: Otar–Blagoveschenka (17 fatalities), Kulan Bypass (2 fatalities), and Korday to the Kyrgyz border at Karasu (0 fatality).

Sources: Asian Development Bank, Committee of Roads under the Ministry of Investment and Development, and Consultant’s Report on Economic Reevaluation of Project 3.

18 A

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end

ix 2

SUMMARY OF THE INVESTMENT PROGRAM AND ITS PROJECTSa

Project No. Project 1 Project 2 Project 3 Project 4 Loan No. Loan 2503 Loan 2562 IDB Loan

b Loan 2697 Loan 8251

b Loan 2735

MFF 0024 Tranche No. (Tranche 1) (Tranche 2) (Tranche 3) (Tranche 4) Road Sections

Km 214–260, Km 404–483

Km 310.5–389.4 Km 536–593 Km 1–17,

Km 162–260 Km 383–404 Km 261.5–310.5

Road Length (km)

– Target 125 79 57 97.7 20 49

– Actual 125 79 57 97.7 20 49

Other Components Road

maintenance and intelligent system

4 road maintenance

depots n/a n/a n/a n/a

Loan Amount – Original 340.00 187.00 170.00 173.00 70.30c 112.00

– Revised 224.95d n/a n/a n/a n/a n/a

– Actual 224.10 184.65 170.00 164.67 68.33e 104.25

Loan Approval

30 December 2008 7 October 2009 8 February 2009 15 November 2010 31 May 2010f 21 February 2011

Loan Signing 30 March 2009 3 December 2009 31July 2009 15 December 2010 23 August 2010 7 June 2011

Loan Effectiveness 31 July 2009 13 April 2010 16 January 2010 15 June 2011 15 July 2011 22 December 2011

Loan Closing – Original 31 December 2013 30 June 2015 11 July 2013 31 December 2013 15 July 2020 31 December 2014

– Revised n/a n/a n/a 31 December 2014 n/a n/a

– Actual 20 March 2014 22 October 2015 12 November 2013 22 April 2015 1 August 2016 27 April 2015

ADB = Asian Development Bank; JICA = Japan International Cooperation Agency, IDB = Islamic Development Bank, km = kilometer, MFF = multitranche financing facility; n/a = not applicable. a

ADB-financed the investment program through multitranche financing facility with four tranches: Loan 2503, Loan 2562, Loan 2697, and Loan 2735 b

The IDB-financed component, on parallel cofinancing arrangement, was not administered by ADB. The JICA-financed component was administered by ADB, following the Framework Agreement between Asian Development Bank and Japan Bank for International Cooperation for the Implementation of the Accelerated Cofinancing Scheme with ADB, effective on 26 September 2007.

c The loan amount approved by JICA was ¥6,351,000,000 ($68,000,000 equivalent at approval).

d Loan proceeds partially cancelled.

e Actual amount = ¥6,109,005,925.00 ($68,326,710.64 equivalent at completion).

f The date shown is the JICA approval date.

Sources: Asian Development Bank and the Committee of Roads under the Ministry of Investment and Development.

Ap

pe

ndix

3 19

SUMMARY ENGINEERING DESIGN

Road Sections

Works Description

Length (km)

No. of

Lanes

Carriageway Width

(m)

Road

Pavement Categorya

Pavement Design Single Axle- Load (tons)

Speed (km/hr)

Kulan Bypass (Km 383–404)

(i) Upgrading the existing Kulan Bypass

5.20

4 2x9.25 Category IB Cement concrete

13 120

(ii) Constructing a new bypass road to be connected to the Kulan Bypass

14.80

4 2x9.25 Category IB Cement concrete

13 120

Total 20.00 Otar– Blagoveschenka Road Section (Km 162–260)

Constructing a new road section 69.50 2b 9.25 Category IB

Cement concrete 13 120

10.50 2b 9.25 Category IB

Crushed stone mastic asphalt

13 120

Total 80.00 Korday to the Kyrgyz Border at Karasu (Km 0–17.7)

(i) Rehabilitating the road approaching the border of the Kyrgyz Republic

10.30 2 7.50 Category II Crushed stone mastic

asphalt

13 120

(ii) Constructing a new road 7.40

2 7.50 Category II Crushed stone mastic

asphalt

13 120

Total 17.70 Hr = hour, IRI = international roughness index, km = kilometer, lm = linear meter, m = meter, no. = number. a

The pavement design was based on 13-ton single-axle load. Kazakhstan pavement category standards are as follows: Category IA: four-lane asphalt concrete pavement Category IB: four-lane cement concrete pavement Category II: two-lane asphalt concrete pavement

b

The project includes four-lane embankment to facilitate future expansion. Sources: Asian Development Bank and the Committee of Roads under the Ministry of Investment and Development.

20 A

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end

ix 4

PROJECT CONTRACT PACKAGES

Works Consulting Services Items Lot 1 (JICA) Lot 2 (ADB) Lot 3 (ADB)

Package Description Construction of the Kulan Bypass

Km 383–404

Road construction from Otar to Blagoveshchenka

Km 162–260

Road construction from Korday to Karasu

Km 0–17.7

Construction Supervision Consultant

Km-length output 20 km 80 km 17.7 km n/a

Contractor’s/Consultant’s Name ZholKyrylys LLP (KAZ)a Cengiz Insaat ve Ticaret

Anonim Sirketi (TUR) Akmola Kurylys

Materialdary LLP (KAZ) SNC Lavalin Int’l Inc (CAN) in

association with KazdorProject (KAZ)

Procurement/Recruitment Method ICB ICB ICB QCBS

ACN Posting 20 May 2010 20 May 2010 20 May 2010 20 May 2010 IFB/CSRN Posting 15 September 2010 15 September 2010 15 September 2010 30 December 2010 Contract Award Date 12 August 2011 12 August 2011 8 November 2011 04 April 2012

Contract Signing Date 09 September 2011 26 August 2011 15 November 2011 09 April 2012

Contract Period - Original 690 days 750 days 630 days 25 months

- Actual 694 days 1,084 days 1,035 days 33 months Commencement Date 23 November 2011 18 November 2011 26 January 2012 22 April 2012 Completion Date - Original 23 October 2013 18 December 2013 26 October 2013 22 May 2014

- Actual 17 October 2013 6 November 2014 26 November 2014 31 December 2014

Defects Notification Period - Original 730 days 730 days 730 days n/a

- Actual 20 November 2015 November 2016b November 2016

b n/a

Accepted Contract Amount (ACA) KZT8,649,562,291.68 KZT18,290,797,377.17 KZT1,487,678,879.30 USD3,432,953.3 + CAD3,527,947.88

Variations - Number 5c 10

d 6

e 4

- Total Cumulative Amount KZT82,732,905.83 KZT ,366,963,062.90 KZT177,791,820.07 0f

- % to ACA 1% 7% 12%

Price Adjustment due to Price Escalation

- Total Amount KZT 2,632,965,335.59 KZT 8,381,785,888.16 KZT 452,741,720.95 n/a

- % to ACAg 30% 46% 30%

Revised Contract Amount (Total)h KZT 11,365,260,533.10 KZT 28,039,546,328.23 KZT 2,118,212,420.32 n/a

Revised Contract Amount (ADB financing) KZT 10,356,772,449.38 KZT 23,833,614,378.99 KZT 1,800,480,557.27 n/a Disbursed (USD equivalent, ADB financing) USD 68,326,710.64 USD 149,929,501.44 USD 10,343,380.93 USD 4,398,946.00

ACN = advance contracting notice, ADB = Asian Development Bank, CAD = Canadian dollar, CSRN = consulting services recruitment notice, ICB = international competitive bidding, IFB = invitation for bids, JV = joint venture, KZT = Kazakhstan tenge, n/a = not applicable, QCBS = quality-cost based selection, % = per cent. a JV Kazakhdorstroy (KAZ)/Hyundai (JAP) was renamed to ZholKyrylys LLP on 25 April 2014. Performance security was modified in the name of ZholKyrylys LLP.

b The Defects Notification Period is expected to end by November 2016. c The five minor variations consisted of relocation of communication cables, additional road safety facilities, additional cattle crossing, replacement of a soil embankment, power

transmission reconstruction, and others. d The 10 contract variations consisted of (i) relocation of a 4.8-km gas pipeline resulting from the revised safe distance standards of gas pipelines from the road as required by the

Intergaz Central Asia joint-stock company (JSC) during the road construction in July 2013; (ii) realignment of the road baseline to avoid a burial site dated 1930, which was discovered during geodetic pegging; (ii) presence of an archeological site, which required an archeological study prepared by KazAcheology LLP; (iv) replacement of 265,474 m3 soil deemed unsuitable for use as embankment for 7.4 km; (v) dismantling of containers at the Kainar interchange; (vi) unanticipated changes in slope steepness at Km203+00–Km216+60 including concrete drainage channel; and (vii) additional cattle crossing and bus stops as requested by the local community.

Ap

pe

ndix

4 21

e The six contract variations consisted of additional major earthworks to raise the embankments, installation of additional guardrails and water drainage, construction of a parking lot

for trucks at Karasu border crossing point, relocation of powerlines, construction of additional bus stops, among others.

f Contract variations involved reallocation of payment currencies, with zero net effect on the total contract amount. g The sum of the amount of the price escalation for the three contracts is 40% of the total ACA of the three contracts. h ADB financing is 85% of the total expenditure claimed for works (lots 2 and 3) and 100% for consulting services (net of VAT) as per loan agreement. JICA finances 100% for works in

Lot 1 (net of taxes and other ineligible items as indicated in the loan agreement). Sources: Asian Development Bank and the Committee of Roads under the Ministry of Investment and Development.

22 A

pp

end

ix 5

PROJECT COST AND FINANCING PLAN

($ million)

Appraisal Estimatea Actual Cost

b

ADB JICAc Government Total ADB JICA

c Government Total

A. Base Costd

1. Civil Works

a. Km 373–404 (20 km) 0.00 56.77 10.02 66.79 0.00 68.33 8.20 76.53

b. Km 162–260 (80 km) 139.08 0.00 24.54 163.62 149.93 0.00 25.79 175.72

c. Korday to Karasu (Km 17.7) 10.73 0.00 1.89 12.62 10.34 0.00 1.80 12.14

Subtotal Civil Works 149.81 56.77 36.45 243.03 160.27 68.33 35.79 264.39

2. Consulting Services

Construction Supervision Consultant 6.87 0.00 0.00 6.87 4.40 0.00 0.52 4.92

Subtotal Consulting Services 6.87 0.00 0.00 6.87 4.40 0.00 0.52 4.92

Total Base Cost (A) 156.68 56.77 36.45 249.90 164.67 68.33 36.31 269.31

B. Contingenciese

Total Contingencies (B) 16.32 11.23 3.55 31.1 0.00 0.00 0.00 0.00

Total Project Cost (A+B) 173.00 68.00 40.00 281.00 164.67 68.33 36.31 269.31 ADB = Asian Development Bank, JICA = Japan International Cooperation Agency, km = kilometer. a

In 2010 prices. b

In 2016 prices. c

USD equivalent of the JICA loan in yen at appraisal and at completion. d

Taxes and duties are included. e Contingency includes physical and price adjustments. Source: Asian Development Bank and the Committee of Roads under the Ministry of Investments and Development.

Appendix 6 23

DISBURSEMENT OF ADB AND JICA LOAN PROCEEDS

Table A6: Annual and Cumulative Disbursement of ADB and JICA Loan Proceeds

Item 2011 2012 2013 2014 2015 2016 Total

Annual L2697a 21.77 46.75 59.56 35.81 0.79 0.00 164.67

Disbursement L8251b 8.77 25.58 33.35 0.00 0.00 0.63 68.33

Total 30.53 72.33 92.90 35.81 0.79 0.63 233.00

% 13.10 31.04 39.87 15.37 0.34 0.27 100.00

Cumulative L2697a 21.77 68.51 128.07 163.89 164.67 164.67 164.67

Disbursement L8251b 8.77 34.35 67.69 67.69 67.69 68.33 68.33

Total 30.53 102.86 195.77 231.58 232.37 233.00 233.00

% 13.10 44.15 84.02 99.39 99.73 100.00 100.00 ADB = Asian Development Bank, JICA = Japan International Cooperation Agency, L = loan.

a ADB loan.

b JICA loan in USD equivalent.

Figure A6: Annual and Cumulative Disbursement of ADB and JICA Loan Proceeds

0

50

100

150

200

250

2011 2012 2013 2014 2015 2016

$ M

Total Annual Disbursement Total Cumulative Disbursement

L2697 Cumulative Disbursement L8251 Cumulative Disbursement

24 A

pp

end

ix 7

PROJECT IMPLEMENTATION SCHEDULE

ADB = Asian Development Bank, JICA = Japan International Cooperation Agency, Km = kilometer, Q = quarter. a From advertisement of the invitation for bids or consultant services recruitment notice to contract signing. b From commencement of works or consulting services to physical completion.

Source: Asian Development Bank and the Committee of Roads under the Ministry of Investments and Development

Item Activity

Milestone Events

Loan 2697 (ADB) Loan Approval

Loan Effectivity

Loan Closing

Loan 8251 (JICA) Loan Approval

Loan Effectivity

Loan Closing

Civil Works

Consulting Services

Q3Q2 Q3 Q4 Q1 Q2Q2

2013

Q1 Q2

2010

Q2 Q3

Construction Supervision

Consultant

(ADB-financed) Implementation

Recruitmenta

Implementation

20122011

Q1 Q1 Q4

a. Km 383-404 (20 km)

(JICA-financed)

Procurementa

Implementationb

Procurementc. Korday to Kyrgyz

border (km 17.7)

(ADB-financed)

b. Km 162-260 (80 km)

(ADB-financed)

Procurement

Implementation

2016

Q1 Q2Q3 Q4 Q4

2014

Q4 Q3 Q4

2015

Q1Q1 Q2 Q3 Q4 Q3

At appraisal Actual Defects Liability Period

Appendix 8 25

CHRONOLOGY OF MAJOR EVENTS

Year Date Main Event 2010 2–13 February Fact-finding mission fielded. 14 April JICA loan negotiations held between ADB and Ministry of Finance. 2–10 June Project consultation mission fielded. 20 May Advance contracting notice advertised. 31 May JICA Loan 8251 approved. 30 June ADB loan negotiations held between ADB and Ministry of Finance. 23 August JICA Loan 8251 Agreement signed. 24 August CSRN for construction supervision consultant advertised. 15 September IFB for procuring works advertised. 27 September–5 October Project consultation mission fielded. 15 November ADB Loan 2697 (MFF third tranche) approved. 15 December ADB Loan 2697 Agreement signed. 2011 26 January–4 February Safeguards (social) review mission fielded. 26 March Community Liaison Group was formed. 7–13 June Safeguards review mission conducted. 15 June ADB Loan 2697 effectiveness declared. 13–19 July Project review mission fielded. 15 July JICA Loan 8251 effectiveness declared. 6–15 Aug Midterm safeguards review mission fielded. 12 August Works contracts for Km 383–404 and Km 162–260 road sections

awarded. 4–11 October Special project administration mission fielded. 8 November Works contract for Korday to Karasu section awarded. 18 November Works at Km 162–260 road sections commenced. 23 November Works at Km 383–404 road section commenced. 2012 26 January Works on the Korday to Karasu section commenced. 9–16 February Project review mission held. 4 April Contract for construction supervision consultant awarded. 9 April Contract for construction supervision consultant signed. 22 April Services of the construction supervision consultant commenced 23 April–4 May Project review mission held. 25 September–8 October Midterm project review mission fielded. 2013 2–12 April Project review mission held. 3–11 June Project review mission held. 15–19 July Safeguards mission held. 21–30 October Project review mission held 23 October Works on road section Km 383–404 completed. Taking-over

certificate issued. Defects liability period started from 24 October 2013 to 23 October 2015.

18 November Loan 2697 closing date extension approved from 31 December 2013 to 31 December 2014.

2014 5–7 March Safeguards mission held. 6 August Executing agency changed from Ministry of Transport and

Communications to Ministry of Investments and Development. Committee of Roads remained the implementing agency.

2014 29 September–4 October Project review mission held.

26 Appendix 8

Year Date Main Event

6 November Works on road section Km 162–260 completed. Taking-over certificate issued. Defects liability period started from 7 November 2014 to 6 November 2016.

26 November Works on the Korday to Karasu road completed. Taking-over certificate issued. Defects liability period started from 27 November 2014 to 26 November 2016.

31 December Services of construction supervision consultant completed. Contract extended up to end of defects liability period under financing from the Government of Kazakhstan.

2015 2–6 March Project review mission held. 25–30 May Project review mission held. 22 April Loan 2697 financially closed and unutilized amount of $8.33 million

cancelled. 15–21 October Project completion mission held. 2016 1 August Loan 8251 financially closed and unutilized amount of $2.39 million

cancelled. ADB = Asian Development Bank, CSRN = consultant services recruitment notice, IFB = invitation for bids, JICA = Japan International Cooperation Agency, km = kilometer, MFF = multitranche financing facility. Source: Asian Development Bank.

Appendix 9 27

PROJECT ORGANIZATIONAL STRUCTURE

COR = Committee of Roads, IND = India, ITA = Italy, LLP = limited liability partnership, KAZ = Kazakhstan. a The Government’s reorganization on 6 August 2014 replaced Ministry of Transport and Communications (MOTC) with

Ministry of Investment and Development (MID), which absorbed the functions of MOTC. b During project implementation in 2013, Zhambyl Oblast Road Department was replaced with the Road Laboratory as

the project administrator. KazAvtoZhol’s function was limited to monitoring and resolving safeguards issues. c

The project management consultant engaged under Project 1 is for the entire investment program that comprise 4 projects.

d JV Kazakhdorstroy (KAZ)/Hyundai [JAP]) was renamed to ZholKyrylys LLP on 25 April 2014. Performance security

was modified in the name of ZholKyrylys LLP. Sources: Asian Development Bank and Committee of Roads under the Ministry of Investment and Development.

International Financial Institutions

Asian Development Bank Japan International

Cooperation Agency

Borrower Ministry of Finance

Executing Agency Ministry of Investment and

Development a

Implementing Agency Committee of Roads

(COR)

Project Director (with COR staff for road

engineering, construction supervision, financial

management, safeguards, and contract administration)

Construction Supervision Consultant SNC Lavalin International

Inc. in association with KazdorProject (KAZ)

Zhambyl Oblast Road Department /

Road Laboratoryb

Contractor Cengiz Insaat ve Ticaret

Anonim Sirketi (TUR)

Otar–Blagoveshchenka Km 162–260, 80 km

Contractor Akmola Kurylys

Materialdary LLP (KAZ)

Korday to Karasu Km 0–17.7, 17.7 km

Contractor

ZholKyrylys LLP (KAZ) d

Kulan Bypass Km 383–404, 20 km

Project Management

Consultant (under L2503)c

SAI (IND)

28 Appendix 10

STATUS OF COMPLIANCE WITH LOAN 2697-KAZ COVENANTS

Covenant

Reference in Loan

Agreement

Status of Compliance SECTOR

Implementation Arrangements. As the Project Executing Agency, MOTC shall have the overall responsibility for the implementation of the Project. MOTC and the Committee of Roads of MOTC, as the implementing agency for this Project, shall be assisted by (a) PMC-ADB and (b) the construction supervision consultants to be engaged under the Project.

Schedule 5, Para. 1

Complied with. Ministry of Transport and Communications (MOTC) was assigned as the executing agency (EA) for the investment program. As the executing agency, MOTC has the overall responsibility in executing the investment program. MOTC designated Committee of Roads (COR) as the implementing agency (IA) for all tranche projects under the investment program (including Loan 2697/L8251). COR was assisted by (a) SAI Consulting Engineers (India), the project management consultant (PMC) engaged under the first project (Loan 2503-KAZ), in managing the investment program and subsequent tranche projects. (b) SNC Lavalin International Inc. in association with KazdorProject, the construction supervision consultant engaged under the project, in supervising the works progress and administering contracts to ensure quality and timely completion of road construction. As a result of the government’s reorganization on 6 August 2014, the Ministry of Investment and Development (MID) absorbed the functions of MOTC. Under this new set-up, COR remains the implementing agency under MID.

The Borrower shall ensure that: (a) the construction supervision consultants are

mobilized by MOTC prior to commencement of any Works;

Para. 2 (a) Partly complied with. A representative from Zhambyl Oblast COR was designated as the Project Engineer prior to the commencement of Works until SNC Lavalin International Inc. in association with KazdorProject, the construction supervision consultant, was mobilized in April 2012.

(b) adequate staff is assigned to MOTC and the Committee for Roads to assist in carrying out relevant implementation tasks for the duration of the Project; and

(b) Complied with. Selected COR staff were assigned to assist in project implementation. The number of staff was adequate to carry out key project implementation tasks.

(c) MOTC carries out the Project in a manner and according to the implementation schedule as agreed with ADB.

(c) Complied with. COR monitored the project's progress vis-à-vis implementation schedule. As agreed with ADB, COR revised the implementation

Appendix 10 29

Covenant

Reference in Loan

Agreement

Status of Compliance schedule to accommodate the extended works in the two road sections (Km 162–260 and Korday to the Kyrgyz border at Karasu) due to unexpected changes in works technical specifications. For example, the gas national agency changed its requirements for the distance between the road and the gas pipeline during road construction requiring relocation of pipelines.

Project Monitoring, Review & Evaluation. The Borrower shall cause MOTC to monitor and evaluate the performance of this Project through a project performance monitoring system. The key indicators and assumptions outlined at the impact and outcome levels in the Project design and monitoring framework will be the primary data required for analysis.

Schedule 5, Para. 3

Complied with. COR monitored and evaluated the project performance through a project performance monitoring system (PPMS), which consisted of (i) DMF specifying the performance targets and indicators, along with risks; (ii) project performance reports consisting of monthly and quarterly progress reports prepared by the PMC and the CSC, safeguards (environment and LAR) monitoring reports, and annual financial audit reports; and (iii) project completion report detailing the project achievements. The progress reports included updates on road and work safety. Data collection included (i) joint project review and safeguards missions with ADB; (ii) consultations/ meetings with consultants, contractors, affected people, and other concerned agencies; (iii) project records of COR, consultants, and contractors; and (iv) other technical road surveys.

A joint mid-term review shall be carried out 1 year after the Effective Date. The mid-term review shall focus on the engineering, environmental and social safeguards of the Project, compliance with loan covenants and the undertakings set out in the FFA. The review will allow for any necessary mid-course corrections to ensure successful implementation and the achievement of objectives of the Project and the Investment Program.

Para. 4 Complied with. Midterm review mission was conducted on 25 September–8 October 2012.

Construction Quality. The Borrower shall cause MOTC to ensure that the Project is carried out in accordance with the applicable technical specifications and design, and that the construction supervision, quality control and Project management are performed in accordance with applicable standards and best international practices.

Schedule 5, Para. 8

Complied with. CSC monitored the construction quality following contract provisions and applicable technical specifications. MID (MOTC) and PMC staff also regularly conducted site visits and quality/progress inspection meetings with the Oblasts' Road Department, CSC, and contractors.

30 Appendix 10

Covenant

Reference in Loan

Agreement

Status of Compliance Contracts for Works. The Borrower shall also cause MOTC to: (i) ensure that all Works contracts include a contractor's obligation to comply with road safety measures; and (ii) monitor the accident rate and traffic volume during the operation of the Project Road.

Schedule 5, Para. 9

(i) Complied with. All three civil works contracts included contractors’ obligation to comply with road safety measures at the construction stage. (ii) Being complied with. MID committed to continue monitoring road crash rate and traffic volume during operation of the Project Road (after DNP).

Particular Covenants. (a) The Borrower shall cause the Project to be carried out with due diligence and efficiency and in conformity with sound applicable technical, financial, business, and development practices.

Article IV, Section 4.01

(a) Complied with. Due diligence (safeguards, economic analysis, engineering design) were carried out for the project.

(b) In the carrying out of the Project and operation of the Project facilities, the Borrower shall perform, or cause to be performed, all obligations set forth in Schedule 5 to this Loan Agreement.

(b) Complied with. MOF performed their tasks indicated in Schedule 5.

The Borrower shall make available, promptly as needed, the funds, facilities, services, land and other resources, as required, in addition to the proceeds of the Loan, for the carrying out of the Project and for the operation and maintenance of the Project facilities.

Section 4.02 Complied with. MOF made available the counterpart funds for the Project, and MOTC/MID and COR made available the facilities, services, land and other resources in implementing the Project.

(a) In the carrying out of the Project, the Borrower shall cause competent and qualified consultants and contractors, acceptable to ADB, to be employed to an extent and upon terms and conditions satisfactory to the Borrower and ADB. (b) The Borrower shall cause the Project to be carried out in accordance with plans, design standards, specifications, work schedules and construction methods acceptable to ADB. The Borrower shall furnish, or cause to be furnished, to ADB, promptly after their preparation, such plans, design standards, specifications and work schedules, and any material modifications subsequently made therein, in such detail as ADB shall reasonably request.

Section 4.03 Complied with. The procurement of works and recruitment of consulting services followed ADB guidelines, and each step of the process required ADB prior review. Complied with. COR rigidly monitored the quality of works progress and completion following the design and technical specifications, work schedule and construction method. COR thoroughly reviewed all contract variations and price adjustments due to price escalation before submitting them to ADB for endorsement.

The Borrower shall ensure that the activities of its departments and agencies with respect to the carrying out of the Project and operation of the Project facilities are conducted and coordinated in accordance with sound administrative policies and procedures.

Section 4.04 Complied with. MOF, MOTC/MID and COR (particularly, those responsible for engineering, finance, safeguards and contract management) collaborated and coordinated well with the Zhambyl Oblast Road Department, other relevant

Appendix 10 31

Covenant

Reference in Loan

Agreement

Status of Compliance government agencies, and akims.

The Borrower shall enable ADB's representatives to inspect the Project and Works, and any relevant records and documents.

Section 4.06 Complied with. ADB missions included project site visits to inspect physical progress of works and other project facilities, discuss contract and implementation issues, and verify relevant records.

The Borrower shall ensure that the Project facilities are operated, maintained and repaired in accordance with sound applicable technical, financial, business, development, operational and maintenance practices.

Section 4.07 Complied with. COR staff regularly inspected the project facilities at project sites and the Astana office to ensure that operations following working environment standards.

FINANCIAL

(a) The Borrower shall: (i) maintain, or cause to be maintained, separate accounts for the Project; (ii) have such accounts and related financial statements audited annually, in accordance with appropriate auditing standards consistently applied, by independent auditors whose qualifications, experience and terms of reference are acceptable to ADB; (iii) furnish to ADB, as soon as available but in any event not later than six months after the end of each related fiscal year, certified copies of such audited accounts and financial statements and the report of the auditors relating thereto (including the auditors' opinion on the use of the Loan proceeds and compliance with the financial covenants of this Loan Agreement, all in the English language; and (iv) furnish to ADB such other information concerning such accounts and financial statements and the audit thereof as ADB shall from time to time reasonably request.

Article IV, Section 4.05

(a) Complied with. (i) MOF/MOTC set up and maintained separate financial records and accounts for utilizing ADB loan, JICA loan and Borrower’s counterpart funds; (ii) ADB accepted the audited project financial statements (APFS) including the audit report and management letter for fiscal years 2011 to 2014, which were submitted by independent auditor. These are all uploaded in eOps project record. Audit report and APFS for FY2015 are expected by end of June 2016; (iii) The audit report includes auditor’s opinion confirming the use of loan proceeds only for project purposes; and (iv) MOTC/MID provided any related information to ADB as requested.

(b) The Borrower shall enable ADB, upon ADB's request, to discuss the Borrower's financial statements for the Project and its financial affairs related to the Project from time to time with the auditors appointed by the Borrower pursuant to Section 4.05(a) hereinabove, and shall authorize and require any representative of such auditors to participate in any such discussions requested by ADB, provided that any such discussion shall be conducted only in the presence of an authorized officer of the Borrower unless the Borrower shall otherwise agree.

(b) Complied with. ADB discussed with MOF and MOTC/MID any financial matters as needed.

Financial Management, Auditing and Reporting. The Borrower shall ensure that:

Schedule 5, Para. 5

32 Appendix 10

Covenant

Reference in Loan

Agreement

Status of Compliance (a) a financial management system satisfactory to ADB is established; and

(a) Complied with. MOTC established the financial unit within COR on 18 June 2009 before the effective date of the first project (L2503) on 31 July 2009. This financial unit is for the Investment Program and all its projects. This unit has qualified staff members, which were supervised by the Project Director. MOTC set up the financial management system for the IFI-financed projects (including ADB projects), with the assistance of a World Bank consultant. The automated accounting system was created in 2010. FY2013 audit report confirmed full implementation of the automated accounting system.

(b) an annual performance audit for the Project is carried out, at the Borrower's own cost, in accordance with the terms of reference to be developed by ADB.

(b) Not Complied with. No annual performance audit for the project was carried out. However, the review missions, quarterly and monthly progress reports, safeguards monitoring reports and annual financial audit reports, together with eOps project performance indicators, helped to monitor the project performance.

Without any prejudice to the provisions of (a) Section 4.05 of this Loan Agreement and (b) Article VII of the Loan Regulations, the Borrower shall ensure that all entities involved in Project implementation maintain separate records and accounts for the utilization of the respective proceeds of the Loan, the JICA Loan, and the counterpart funds provided by the Borrower.

Para. 6 Complied with. The annual audit reports confirmed that separate financial records and accounts were set up for utilizing ADB loan, JICA loan and Borrower’s counterpart funds.

In addition to the requirements set forth in Section 7.04 of the Loan Regulations, the Borrower shall cause MOTC to submit to ADB: (a) monthly reports within 10 calendar days after each calendar month from the Effective Date to update the status of relevant ongoing Project implementation activities and issues; (b) quarterly progress reports within 2 weeks after each quarter from the Effective Date, and (c) other performance and monitoring reports on a semi-annual basis.

(a) Complied with. PMC and CSC submitted 16 monthly progress reports. (b) Complied with. PMC and CSC submitted 9 quarterly progress reports. (c) Partly Complied with. No other performance and monitoring reports were identified as necessary on a semi-annual basis as both PMC and CSC submitted the monthly and quarterly reports, PMC submitted the LAR monitoring reports, and CSC the submitted environment monitoring reports. However, a PPMS report was required from CSC as per terms of reference, but was not carried out.

Appendix 10 33

Covenant

Reference in Loan

Agreement

Status of Compliance Counterpart Support. Without limiting the generality of Section 4.02 of this Loan Agreement, the Borrower shall make available all counterpart funds required for timely and effective implementation of the Project through annual budget allocations to MOTC, and shall ensure that necessary resources thus required are released in a timely manner. The Borrower shall ensure that MOTC includes the updated funding requirements for implementation of the Project in its annual development programs.

Schedule 5, Para. 7

Complied with. MOF annually allocated government counterpart funds and timely released payments for withdrawal applications from 2011 to 2015. MOTC included updated funding requirements for project implementation in its annual development program to facilitate payments. Note that final claims for works and services done on or before the loan closing date of 31 December 2014 were processed during the winding up period until 30 April 2015.

SAFEGUARDS Contracts for Works. Without prejudice to Paragraphs 11, 12, 13, 14 and 15 of Schedule 5 hereof, the Borrower shall cause MOTC to ensure that, subsequent to the award of any Works contracts, no notice to proceed is issued to the relevant contractors until the applicable provisions of the LARP (including, in particular, the provision on the timely payment of compensations to affected persons) relating to the respective sections of road, the EIA, and the updated EMP have been complied with.

Schedule 5, Para. 9

Complied with. Notice-to-proceed was issued to contractors for road sections that complied with the provisions of the LARP, EIA, and updated site-specific EMP.

Environment. The Borrower shall cause MOTC to ensure that: (a) the design, construction, and operation and maintenance of the Project facilities are carried out in accordance with ADB's Safeguard Policy Statement (2009), the Borrower's all applicable environmental laws and regulations, the EARF, the cumulative environmental impact assessment prepared for the Investment Program and agreed with ADB, and the EIA; and

Schedule 5, Para. 11

(a) Complied with. The design, road construction and operation and maintenance followed ADB’s Safeguard Policy Statement (SPS), Kazakhstan’s applicable environmental laws and regulations, the EARF, and EIA.

(b) potential adverse environmental impacts arising from the Project are minimized by implementing all mitigation and monitoring measures as presented in the EMP.

(b) Complied with. CSC supervised the contractors' implementation of the site-specific EMPs to minimize if not eliminate potential adverse environmental impacts arising from the Project.

The Borrower shall cause MOTC to further ensure that: (a) the EMP is updated prior to issuance to any Works contractor of any notice to proceed;

Para. 12 (a) Complied with. The EMP was updated prior to notice-to-commence issuance.

(b) sufficient resources are made available to implement, monitor, and record the implementation of the EMP;

(b) Complied with. MID (MOTC) allotted a sufficient budget of about $0.2 million to implement, monitor and record EMP

34 Appendix 10

Covenant

Reference in Loan

Agreement

Status of Compliance implementation.

(c) semi-annual environmental reports are prepared and submitted to ADB within three months of the end of each period covered;

(c) Complied with. MID (MOTC) submitted 4 environmental safeguard monitoring reports, and reports were disclosed at the ADB website after endorsement by the CWRD Safeguards Specialist, albeit report submission was always delayed.

(d) the reports include, inter alia, a review of progress made on the implementation of the EMP and the EIA, problems encountered and remedial measures taken;

(d) Complied with. The EMRs included a review of progress in implementing EIA/EMP. Updates were also included in the monthly or quarterly project progress reports.

(e) the detailed engineering design and the Works contracts under the Project incorporate applicable environmental measures identified in the EIA and the EMP; and

(e) Complied with. MID (MOTC) confirmed that the engineering design and works contracts incorporated applicable environmental measures identified in the EIA and the EMP.

(f) contractors are supervised to ensure compliance with the requirements of the EIA and the EMP.

(f) Complied with. CSC supervised contractors’ compliance with EIA/EMP. COR as well supervised contractors.

Land Acquisition and Resettlement. The Borrower shall cause MOTC to ensure that the Project is carried out in accordance with the Borrower's all applicable laws and regulations, ADB's Safeguard Policy Statement (2009), the LARF and the LARP, including, inter alia, the following provisions: (a) the LARP shall be disclosed to affected persons in accordance with the LARF;

Schedule 5, Para. 13

(a) Complied with. The LARP, based on LARF, was disclosed to the affected persons. Consultations with affected persons and local authorities started in 2007 during project feasibility study. Consultations with affected persons were conducted in (i) T. Ryskulov raion (km 383-404) in 2009, and (ii) Korday raion in March 2010.

(b) the LARP shall be submitted to ADB for review and clearance prior to award of any Works contract;

(b) Complied with. The draft LARP for the three sections was cleared by ADB and uploaded to the ADB website in October 2010 prior to award of any works contract. The final LARP was disclosed in September 2011.

(c) all land and rights of way required by the Project shall be acquired and made available in a timely manner;

(c) Complied with. A total of 530.44 hectares were required for the Project, with additional 174.08 hectares of land for temporary use as base camps, storages and areas for other construction activities. All land and rights of way required by the Project were acquired and made available on time.

(d) no physical displacement or economic displacement shall occur and no notice to proceed is issued to relevant Works contractors until: (i) the LARP is finalized, which includes a plan that creates conditions for income and livelihood rehabilitation to help

(d) Complied with. Physical displacement of persons occurred and notice-to-commence issued after (i) LARP has been finalized, and (ii) compensation and other entitlements were provided to affected persons.

Appendix 10 35

Covenant

Reference in Loan

Agreement

Status of Compliance displaced persons; (ii) compensation at full replacement cost has been paid to each displaced person for relevant Project components or sections that are ready to be constructed; (iii) other entitlements listed in the related resettlement plan have been provided to displaced persons;

(e) efficient grievance redressal mechanisms shall be in place to assist affected persons resolve queries and complaints, if any, in a timely manner;

(e) Complied with. The Community Liaison Group (CLG) mechanism was established in 2010 for the 4 projects under the CAREC Corridor 1 Investment Program and Taraz Bypass Project. The CLG Coordinator was engaged under PMC to monitor and regularly report any safeguards issues; and coordinate with COR Zhambyl Oblast/KazAvtoZhol for timely resolution. The CLG coordinator maintained the grievance database of safeguards issues with corresponding actions and updates to monitor timely resolution. MID (MOTC) submitted four LARP compliance internal monitoring reports, which were disclosed at the ADB website after endorsement by the CWRD Safeguards Specialist, albeit report submission was always delayed.

(f) adequate staff and resources shall be made available for supervising and monitoring the implementation of the LARP;

(f) Complied with. PMC safeguards team assisted COR safeguard specialist in monitoring LARP implementation.

(g) an independent monitoring agent acceptable to ADB shall be engaged to carry out external monitoring and evaluation of the LARP and shall report the results to ADB on a semi-annual basis; and

(g) Complied with. An external or independent monitoring expert, financed by ADB, conducted the LARP verification in Q2 2012 and its report was disclosed to ADB website in July 2012.

(h) if during implementation of the LARP, any changes to the location, land alignment of roads, or additional environmental and/or resettlement impacts are identified, the LARP shall be updated and all prior approval by ADB and by the relevant government agencies shall be obtained before further implementation of the LARP.

(h) Complied with. New potential affected households were identified during the mid-term review mission in 2012. CSC conducted impact assessment in 2012 and a supplemental LARP was prepared.

The Borrower shall carry out an analysis of and search for equivalent land plots to be provided to affected leaseholders or consider other support to such leaseholders in accordance with the Borrowers applicable laws and regulations, ADB's Safeguard Policy Statement (2009), the LARF and LARP with the aim of helping such people restore their livelihood.

Para. 14 Complied with. In the absence of alternative land plot, affected persons received monetary compensation for lost assets following Kazakhstan legislation.

36 Appendix 10

Covenant

Reference in Loan

Agreement

Status of Compliance The results of the foregoing shall be attached to the final LARP. In the event that no available land plots from the government-owned resources can be identified, the Borrower shall provide affected long-term leaseholders (farmers having leases of at least five years - affected leaseholders) with sufficient financial or technical assistance to intensify or expand the production in the remaining plot(s) of land held by that affected leaseholder. Information pertaining to the foregoing, including the list of affected leaseholders and the costs, schedules and implementation arrangements for such compensation, shall be set forth in the final LARP. SOCIAL

Prevention of Illegal Trafficking. The Borrower shall ensure that concrete and rigorous measures to detect and prevent illegal trafficking of humans, wildlife, endangered species, and controlled substances on the Project Road are fully implemented.

Schedule 5, Para. 10

Complied with. CSC monitored and found no illegal trafficking of humans, wildlife, endangered species, and controlled substances in the project area during project implementation until project completion.

Labor Standards. The Borrower shall cause MOTC to ensure that: (a) the Works contracts incorporate provisions to the effect that contractors: (i) shall comply with applicable core labor standards and labor laws, and incorporate applicable workplace occupational safety norms; (ii) shall not differentiate payment between men and women for work of equal value; (iii) shall not employ child labor in the construction and maintenance activities; (iv) to the extent possible, shall maximize employment of local poor and disadvantaged persons for project construction purposes, provided that the requirements for job and efficiency are adequately met; and (v) shall encourage employment of skilled and unskilled women laborers; and

Schedule 5, Para. 15

(a) Complied with. The works contracts incorporated (i) applicable core labor laws and workplace occupational safety; and (ii) provisions on no child labor, no payment differentiation between men and women for work of equal value, employment of local poor persons, and employment of skilled and unskilled women laborers. CSC monitored but no outstanding issue had been identified. Contractors have signed agreements with local social protection and labor authorities to employ local unemployed persons.

(b) information on the risks of sexually transmitted diseases, including human immunodeficiency virus/acquired immunodeficiency syndrome, is disseminated to the employees of the Works contractors under the Project and to members of the local communities surrounding the Project Road.

(b) Complied with. On 17 August 2012, CSC Social Development Specialist conducted an orientation program for HIV/AIDS prevention to all three contractors and their staff at CSC office in Korday, Zhambyl Oblast. The three contractors, thereafter, monitored implementation of HIV/AIDS prevention measures as stipulated in their contracts. HIV/AIDS awareness materials including posters were available in the office/workplace. HIV/AIDS program was

Appendix 10 37

Covenant

Reference in Loan

Agreement

Status of Compliance conducted in collaboration with (i) Regional Hospital in Korday, and (ii) Paramedic of Safety Department and Oblast Center for Disease Prevention and Control of AIDS in Taraz Oblast. HIV/AIDS awareness materials were distributed to the local communities surrounding road.

OTHERS Anticorruption The Borrower shall comply with ADB's Anticorruption Policy (1998, as amended to date). The Borrower, consistent with its commitment to good governance, accountability and transparency, agrees that ADB has the right to investigate, directly or through its agents, any alleged corrupt, fraudulent, collusive or coercive practices relating to the Project, and the Borrower shall cooperate fully with any such investigation and to extend all necessary assistance, including providing access to all relevant books and records, as may be necessary for the satisfactory completion of any such investigation.

Schedule 5, Para. 16

Complied with. MOF agreed that ADB has the right to investigate any irregularities. So far, no record of any irregularities was reported during project implementation.

In addition, the Borrower shall cause MOTC to: (a) conduct periodic inspections on the contractors' activities related to fund withdrawals and settlements; (b) ensure that all contracts financed by ADB in connection with the Project include provisions specifying the right of ADB to audit and examine the records and accounts of all contractors, suppliers, consultants, and other service providers as they relate to the Project; (c) ensure that the construction supervision consultant verifies the contractors' payment certificates in accordance with working drawings and contract specifications; and (d) ensure that the anticorruption action plan developed for the Investment Program and agreed with ADB is implemented.

(a) Complied with. With the assistance of PMC and CSC, COR conducted periodic inspections. (b) Complied with. All works contracts included provisions specifying ADB’s right to audit and examine records and accounts. (c) Complied with. CSC verified and signed each contractor’s payment certificate vis-à-vis contract provisions, technical specifications and working drawings. PMC further verified all payment certificates before submission to COR. (d) Complied with. COR implemented the anticorruption action plan indicated in the FAM.

ADB = Asian Development Bank, APFS = audited project financial statement, CLG = Community Liaison Group, COR = Committee of Roads, CSC = construction supervision consultant, DNP = defects notification period, EA = executing agency, EARF = environmental assessment and review framework, EIA = environmental impact assessment, EMP = environmental management plan, FAM = facility administration manual, FY = fiscal year, HIV/AIDS = human immunodeficiency virus infection/acquired immune deficiency syndrome, IA = implementing agency, IFI = international financial institution, JICA = Japan International Cooperation Agency, L = loan, LARF = land acquisition and resettlement framework, LARP = land acquisition and resettlement plan, MID = Ministry of Investment and Development, MOF = Ministry of Finance, MOTC = Ministry of Transport and Communications, PMC = project management consultant, PPMS = project performance monitoring system. Sources: Asian Development Bank and the Committee of Roads under the Ministry of Investment and Development.

38 Appendix 11

CONTRIBUTION TO THE ADB RESULTS FRAMEWORK

No.

Results Framework Indicatorsa

Target Achieved Methods or Comments

1 Roads built or upgraded (km) 117.7 117.7 Total km-length achieved as originally designed based on the engineer’s works completion reports: 20-km for Kulan Bypass (Km 383–404) 80-km for Otar–Blagoveshchenka road

section (Km 162–260) 17.7-km for Korday–Kyrgyz Republic

border (Karasu) road section (Km 0–17.7)

ADB = Asian Development Bank, km = kilometer. a This is the standard transport sector Level 2 indicators as defined in ADB’s Results Framework: Interim Update to

Align with the Midterm Review of Strategy 2020 (2014). The indicator on “roads built or upgraded (km)” replaced the earlier indicator of “national highways, provincial, district, and rural roads built or upgraded (km)”.

Source: Asian Development Bank, and the Committee of Roads under the Ministry of Investment and Development.

Appendix 12 39

ECONOMIC REEVALUATION

A. Background

1. The project was one of four financed under the multitranche financing facility (MFF) for the Central Asia Regional Economic Cooperation (CAREC) Transport Corridor 1 (Zhambyl Oblast Sections) [Western Europe–Western PRC International Transit Corridor] Investment Program, approved in 2008. Through this MFF, the Asian Development Bank (ADB) is financing the corridor sections located in the Zhambyl Oblast (province) of Kazakhstan, with a total length of about 480 km. 2. Project 3, which is the subject of this economic reevaluation, comprised three road sections: (i) Km 162–260 (Otar–Blagoveshchenka), (ii) Korday to the Kyrgyz border at Karasu, and (iii) Km 383–404 (Kulan Bypass). The Otar–Blagoveshchenka section involved constructing 80 km of new two-lane cement concrete roads, with a road base to allow for future widening to four lanes. The Korday–Kyrgyz border section involved rehabilitating the existing 13-km two-lane asphalt concrete road, and constructing a 5-km, two-lane asphalt concrete bypass to the Kyrgyz border at Karasu. The Kulan Bypass section involved upgrading the existing 5.2-km road to a four-lane cement concrete road, and constructing a 14.8 km, four-lane cement concrete bypass road at Kulan. B. Economic Analysis at Appraisal Stage

3. The economic analysis at appraisal was carried out using the Highway Development and Management (HDM) Model (Version 1.3). The HDM model computes road user's economic costs for each section of road for each year of analysis. The inputs to the HDM model were adapted and calibrated to enable vehicle speeds and operating costs to be estimated as accurately as possible in for the Kazakh road network. 4. The with-project scenario involved improving roads as detailed in para. 2 of this appendix. The without-project scenario assumed that the existing road would remain largely unchanged, with the same cross section and with road conditions deteriorating over time. 5. The following economic benefits for existing traffic were identified and monetized at appraisal: (i) vehicle operating cost (VOC) savings; (ii) time savings, and (iii) road safety savings. To calculate changes in VOCs, the initial international roughness index (IRI) values were collected from surveys carried out in 2007 by Kazdorproject. Values were recalculated annually through the HDM model. The IRI value for the cement concrete roads was assumed to be 3.5 at opening and for the asphalt Korday–Kyrgyz border road was assumed to be 2. 6. Benefits were calculated separately for generated traffic. Anticipated generated traffic was estimated at 20% of existing traffic volume, with benefits per user assumed to be equal to 50% of the benefits of existing users applying the “rule of a half” as standard in economic analysis of transport projects. Road safety savings were estimated by assuming a reduction in road safety losses once the project roads are improved. The original economic appraisal was undertaken over a 24-year period, based on a three-year construction period (2010–2012), with the project opening in 2013. C. Economic Reevaluation

7. ADB conducted an economic reevaluation of the project at completion to ascertain whether the project remained economically viable. The reevaluation compared with-project and without-

40 Appendix 12

project scenarios which remain the same as at appraisal, and calculated incremental changes to costs and benefits also using the HDM model. 8. Similar to at appraisal, (i) vehicle operating cost (VOC) savings; (ii) time savings, and (iii) road crash cost savings were considered. The project costs and benefits have been calculated over a 25-year appraisal period (2009–2033), after which a residual value—designed to capture the benefits of the project in the post-appraisal period—is considered.42 The methodology involved a standard incremental discounted analysis of project cost-benefit streams.

D. Demand Estimation

9. The demand analysis at appraisal was based on estimates of annual average daily traffic (AADT) derived from traffic counts taken in 2007 by Kazdorproject. Traffic was forecast to grow in line with changes in real GDP, where the 2007 study prepared by Kazdorproject foresaw the growth of normal traffic at 4% per year over the period 2007–2012 and 6% per year from 2012 onwards. 10. The demand analysis for the economic reevaluation is based on traffic counts conducted by the executing agency in April 2016. Traffic forecasts were amended downwards to account for the sharp slow-down of gross domestic product (GDP) growth to 1.0% in 2015 from 4.3% in 2014, due to low prices for oil, the country’s main export. Growth was assumed to remain low at 0.7% in 2016 and recover slightly to 1.0% in 2017. Kazakhstan's GDP growth is projected to improve to 3.4% for 2018 due to the resumption of oil production in the Kashagan field and the improvement of the Russian economy. The normal traffic growth rate, assumed at reevaluation, is 0.7% in 2016, 1.0% in 2017 and 4%, thereafter. 11. Table A12.1 shows that estimated traffic flows in 2015 at reevaluation were significantly higher than forecast at appraisal based on actual traffic data. However, the forecast growth rates for future years were lower at reevaluation. The forecast traffic flows at the end of the analysis period were marginally higher than at appraisal.

Table A12.1: Current and Forecast Demand on Project Roads (Average Annual Daily Traffic)

Otar–Blagoveshenka Korday–Karasu Kulan Bypass

At Appraisal At

Reevaluation At Appraisal At

Reevaluation At Appraisal At

Reevaluation

2013 4,414 - 2,555 - 3,519 -

2015 4,960 7,399 2,871 5,228 3,954 8,218

2020 6,637 8,465 3,842 5,981 5,291 9,402

2025 8,882 10,299 5,141 7,277 7,081 11,438

2030 11,886 12,530 6,880 8,854 9,475 13,917

2033 14,156 14,095 8,194 9,960 11,285 15,654 Source: Committee of Roads under the Ministry of Investment and Development. 2016.

42

Calculation of the residual value was undertaken using actual works conducted, with an assumed residual value for earth works at 90% sub-base at 20%, bridges at 60%, and cement at 20% of their construction value at the end of the project. Combined, the residual value translates into 45% of the investment cost.

Appendix 12 41

E. Economic Costs

12. Table A12.2 compares actual investment costs with those forecast at appraisal. The total civil works cost was $264.39 million. The civil works cost per km was $2.20 million for Otar–Blagoveshchenka, $0.69 million for the Korday–Kyrgyz border section, and $3.83 million for the Kulan Bypass (which was upgraded to four-lane dual carriageway standard). The value of the civil works contract at completion was 8.8% higher than the estimated amount at appraisal. The total value of the consulting services at completion was 28.4% lower than the estimated amount at appraisal. The decrease in the consulting service costs was caused primarily by over-estimation at appraisal.

Table A12.2: Financial Cost

($ million) Category At appraisal

a At reevaluation

b

Civil Works 243.03 264.39 Consulting Services 6.87 4.92 Taxes and Duties - -

Total Base Cost 249.90 269.10 Physical Contingencies

c 31.10 0.00

Total Project Costs 281.00 269.10 a In 2010 prices.

b In 2016 prices.

c Physical contingencies estimated at about 10% of the civil works cost.

Source: Asian Development Bank, and the Committee of Roads under the Ministry of Investment and Development.

13. The economic reevaluation of the project includes the following costs: (i) capital investment (i.e. civil works and construction supervision); and (ii) the difference in operation and maintenance costs between the with-project and without-project scenarios. Costs related to taxes, duties, and financing charges during implementation have been excluded. Costs and benefits were converted from financial to economic prices in line with ADB guidelines. 43 A conversion factor for non-tradable goods of 0.94 was applied, the shadow wage rate for skilled labor was 0.95 and the shadow wage rate for unskilled labor was 0.70. These rates were chosen based on a previous study in Kazakhstan44 and were applied as at appraisal. 14. Economic costs were brought to a 2010 price base year as used at appraisal by application of a relevant price index.45 Unit rates for road maintenance were based on the assumptions used in the economic analysis at appraisal: (i) routine maintenance costs of $1,000 per kilometer; and (ii) periodic maintenance in 2020 and 2027 at a unit rate of $5 per square meter. F. Economic Benefits

15. The benefits considered in the economic reassessment are savings in VOCs, improvements in travel time, and a reduction in road safety losses. As the project involved construction of a new bypass, the calculation of time savings was based on both reduction in distance travelled and also on expected increases in average speed due to the increased capacity of the four-lane highway. Such benefits formed a large part of the benefits (Table A12.5). The actual traffic count data for 2014, 2015, and 2016 was considered to include 20% generated traffic as at appraisal. The benefits for existing users were first calculated and then the benefits for

43

ADB. 1997. Guidelines for the Economic Analysis of Projects. Manila. 44

ADB. 2003. RRP Rural Area Water Supply and Sanitation Project, Kazakhstan. Manila. 45

World Bank, 2016. World Development Indicators. Washington D.C.

42 Appendix 12

generated traffic were assumed to be equal to 50% of the benefits of existing users applying the “rule of a half” as standard in economic analysis of transport projects. 16. Savings in VOCs were calculated and derived from improvements to the surface conditions and roughness on the new and upgraded sections, relative to the existing substandard sections. Unit rates for VOC/km, which vary with IRI, were calculated using the HDM model. Average speeds used in the economic analysis were also calculated through the HDM model based on road condition, geometry, and traffic intensity. 17. The economic analysis used hourly values of time for car passengers of $4.04 for work travel and $1.21 for non-work travel and for bus passengers of $1.39 for work travel and $0.42 for non-work travel.46 For road safety savings related to Project 3, current data on road-related deaths and injuries were not available at the time the reevaluation took place. Therefore, the same assumptions were used as at appraisal. Road casualties were assumed to cost $412,800 per death and $51,600 per injury.47 F. Results of Economic Reevaluation

18. The results of the economic reevaluation covering the full project period are in Table A12.3. The economic indicators provided are: net present value (NPV) and economic internal rate of return (EIRR). The principal reasons for the differences in the economic indicators between the appraisal and completion stages are (i) lower traffic growth than predicted at appraisal because of an unforeseen drop in GDP growth forecasts, (ii) larger traffic volumes at opening than forecast at appraisal, and (iii) delayed construction. Reasons (i) and (iii) decreased economic efficiency and reason (ii) increased it.

Table A12.3: Project Economic Indicators

Section

NPV (2010 $ million,

World Price Numeraire) EIRR (%)

Entire project 3 At Appraisal 137.26 16.6 At Completion 150.38 23.3 Otar–Blagoveshevka At Appraisal 71.75 15.9 At Completion 122.39 25.1 Korday–Karasu At Appraisal 11.33 19.3 At Completion 23.26 45.0 Kulan Bypass At Appraisal -9.65 10.4 At Completion 4.73 13.5

NPV = net present value; BCR = benefit-cost ratio; EIRR = economic internal rate of return. Source: Asian Development Bank estimates, as included in the project preparatory technical assistance consultant’s report.

19. Sensitivity tests and calculations of switching values were carried out to determine the effect of variations in key input parameters on the key economic indicators. Table A12.4 shows the results of the sensitivity analysis. Switching values were not applicable to the value of time, to vehicle operating costs, or to the value of road casualties as the project remained economically viable when each of these were excluded from the analysis.

46

The values of time are based on the ADB 2008 due diligence study review of economic analysis for CAREC Transport Corridor I (Zhambyl Oblast Section) updated in line with the growth of GDP during the period 2007–2008.

47 The values of casualties are based on the ADB 2007 Feasibility Study for the Western China–Western Europe International Transit Corridor updated in line with the growth of GDP during the period 2007–2008.

Appendix 12 43

Table A12.4: Result of the Sensitivity Analysis

Scenario

NPV (2010 $ million,

World Price Numeraire) EIRR (%)

Switching Value (%)

Base 150.38 23.3 N/A Vehicle Operating Costs–25% 125.14 21.6 N/A Value of Time–25% 115.07 20.9 N/A Value of Road Casualties–25% 142.06 22.7 N/A Road Safety Benefits excluded 117.13 21.1 N/A EIRR = economic internal rate of return, N/A = not applicable, NPV = net present value. Source: Asian Development Bank estimates.

20. In summary, the economic reevaluation was undertaken in line with the ADB guidance. The project return exceeds the 12% threshold, and the project remains economically viable.

Table A12.5: Detailed Results of the Economic Analysis ($ million, 2010 prices, World Price Numeraire, undiscounted)

Year

Capital Costs

Maintenance Cost VOC

Savings Time

Savings

Crash cost

Savings Net

Benefits With Without Incremental

2010 0.00 0.28 0.28 0.00 0.00 0.00 0.00 0.00

2011 27.23 0.29 0.29 0.00 0.00 0.00 0.00 -27.23

2012 63.31 0.31 0.31 0.00 0.00 0.00 0.00 -63.31

2013 78.08 0.32 0.33 -0.01 0.00 0.00 0.00 -78.07

2014 29.71 0.35 0.34 0.01 1.15 2.57 1.25 -24.75

2015 0.00 0.44 0.35 0.10 20.60 26.92 6.40 53.82

2016 0.00 0.45 0.35 0.11 21.86 28.40 6.45 56.60

2017 0.00 0.48 0.36 0.12 23.16 30.15 6.52 59.71

2018 0.00 0.49 0.35 0.14 25.52 33.10 6.77 65.26

2019 0.00 0.50 0.35 0.15 28.24 36.47 7.05 71.61

2020 0.00 0.26 6.88 -6.61 31.29 40.28 7.32 85.50

2021 0.00 0.26 0.15 0.12 19.69 29.01 7.62 56.20

2022 0.00 0.26 0.15 0.12 21.04 30.44 7.92 59.29

2023 0.00 0.28 0.16 0.12 22.49 32.02 8.24 62.63

2024 0.00 0.41 0.30 0.12 24.09 33.79 8.57 66.34

2025 0.00 0.56 0.44 0.12 25.83 35.78 8.92 70.41

2026 0.00 0.71 0.59 0.12 27.72 38.01 9.27 74.89

2027 0.00 0.26 6.88 -6.61 29.78 40.54 9.64 86.58

2028 0.00 0.26 0.15 0.12 19.90 37.61 10.03 67.43

2029 0.00 0.26 0.15 0.12 21.21 39.18 10.43 70.71

2030 0.00 0.28 0.16 0.12 22.61 40.83 10.84 74.17

2031 0.00 0.39 0.30 0.10 24.14 42.56 11.28 77.89

2032 0.00 0.54 0.44 0.10 25.83 44.40 11.73 81.87

2033 -89.25 0.69 0.59 0.10 27.62 46.35 12.20 175.33

EIRR (%) = 23.3

NPV (Discount Rate: 12%) = 150.38

EIRR = economic internal rate of return, NPV = net present value, VOC = vehicle operating cost. Source: Asian Development Bank estimates.

44 Appendix 13

ENVIRONMENT AND SOCIAL SAFEGUARDS

A. Environment

1. The project was classified under category A for environment at appraisal. A series of public consultations, including public hearings, were held and surveys were conducted in two major towns (Turar Ryskulov raion and Korday raion) along the project road in 2008–2009. The Ministry of Transport and Communications (MOTC) prepared an environmental impact assessment (EIA) according to the ADB’s Safeguards Policy Statement (SPS), the investment program’s environmental assessment and review framework, and the country’s environmental laws. The EIA identified environmental impacts related to air and water pollution, noise, flora and fauna, and an archeological site in the project’s right-of-way. The relevant mitigation measures for these environmental impacts were proposed in the EIA for each road section. No major negative impacts were expected and the effective implementation of the environmental management plan (EMP) was aimed at minimizing and mitigating any adverse impacts during construction. The bidding documents and the works contracts contained the environmental management and monitoring requirements. The contractors had the primary responsibility for implementing the EMP and the construction supervision consultant (CSC) monitored the effectiveness of contractors’ compliance with the requirements. 2. During project implementation, the CSC approved the site-specific EMPs that the contractors prepared. The EMPs also identified which permits were needed to comply with government regulations. The contractors engaged independent laboratories to monitor impacts related to air, noise, vibration, and water. On the archeological sites at Km 162–260 road section, the contractor engaged a specialized institute, KazAcheology LLP, in 2012 to undertake an archeological study and excavate about 17 cultural monuments. Artifacts were turned over to the National Museum of Kazakhstan. A burial site dating from 1930 was discovered at Km 390–363 during geodetic pegging. The contractor had the site investigated, and the remains reburied were at a cemetery in Zhalpaksza village according to permits. The contractors cut 2,045 trees, but replanting of trees is planned in a separate state program through the national road operator KazAvtozhol JSC using the road maintenance budget. Mitigation measures set out in the EIA and the site-specific environmental management plans (EMPs) were fully complied with by the contractors during construction. The four environmental monitoring reports prepared by the CSC recorded all the environmental issues, and confirmed that there were no significant negative impacts during implementation. 3. At completion, local authorities reported no residual impacts and no complaints from people living along the project roads. Upon completion of the Kulan Bypass and the Korday–Karasu road sections, the contractors restored the borrow pits, quarries, service roads, plants, camps, and other project facilities. On the Otar–Blagoveschenka road section, these project facilities are not restored. They are being used to build the government-financed one-way, two-lane cement concrete pavement on the Blagoveschenka to Otar road section, where construction started after the ADB-funded component was complete. These will be restored after the government-financed project is complete. No other environment issues were raised. 5. The English version of the draft EIA for each road section was posted on ADB’s website on 19 February 2010, and the Russian version of the draft EIAs have been available on MOTC’s website since 2008. The final EAIs were posted on ADB’s website in October 2010. The four environmental monitoring reports prepared during project implementation from 2012 to 2014 were disclosed on the ADB website.

Appendix 13 45

B. Land Acquisition and Social Safeguards 3. The project was classified under category B for involuntary resettlement. The scope of land acquisition was initially defined at project feasibility in 2010. The list of affected land, structures, and owners was prepared at the project design stage when road alignment was approved. The Zhambyl State Scientific and Production Center for Land Management was engaged to prepare the land management documentation with a specified quantity of affected land plots based on the valuation reports prepared by a licensed appraiser and the design documents. The draft land acquisition and resettlement plan (LARP) was prepared in September 2011 in compliance with the land acquisition and resettlement framework, which was agreed with the government for the investment program. The number of displaced people initially identified was 107, with three leaseholders losing 10% or more of their total productive land. This required 529.90 hectares (ha) of land, of which 527.08 ha were agricultural and 2.82 ha commercial. Minor differences were identified after verifying LARP and data from the Regional Department of Roads (MOTC) under the Zhambyl Oblast. 4. The LARP was further updated during project implementation to reflect changes in number of affected people. Three households with a total of 1.0871 ha and two structures were affected (0.47 ha were privately owned and 0.62 ha leased). No vulnerable households were identified. The contractor rented land for batching plants, field offices/camps, and borrow pits, and will return this land to its original state after works are complete. 5. A LARP due-diligence report was prepared because 16 containers at Kainar interchange needed to be moved (from PK 783 to PK 794). The project conducted several consultation sessions with the owners of the containers to discuss the provisions of LARP. The akimat provided the land for the 16 containers, and the contractor provided water and electricity connections. 6. The government was responsible for land acquisition and resettlement activities under the project. A total of 530.44 ha of permanent land were actually required, of which 527.18 ha were agricultural and 3.26 ha commercial. In addition, 174.08 ha of land were required for temporary use as base camps, storages and areas for other construction activities. KZT294,527,207 was allocated from the state budget for paying the (i) compensation to the 107 verified affected people for lost land and structures—98 households and 9 legal entities, and(ii) relocation allowances. 7. The draft LARP was posted on the ADB website in October 2010, the final LARP in September 2011, and the external LAR compliance report in July 2012. The four internal LAR compliance monitoring reports prepared during project implementation from 2012 to 2014 were disclosed on the ADB website. C. Indigenous People

8. The project was classified under category C for effects to indigenous peoples: the project did not affect any people fitting ADB’s definition of indigenous peoples. D. Grievance Redress Mechanism

9. A grievance redress mechanism was set up for the investment program. It started with the establishment of a grievance redress panel in October 2010 for the Zhambyl Oblast projects, in response to an ADB Mission request of June 2010 to set up a grievance redress mechanism to tackle LARP issues. In March 2011, the Community Liaison Group (CLG) was formed with the representatives from COR (the chair), Zhambyl Road Department, akimats, nongovernment

46 Appendix 13

organizations, the project management consultant (PMC), the CSC, contractors, and ADB staff. A CLG coordinator was recruited under the PMC contract. The CLG was established to (i) provide timely, efficient two-way feedback on local community concerns (those related to the safeguards, and others) and (ii) raise public awareness of activities under the investment program. CLG guidelines were prepared to detail the purpose, composition, key responsibilities, grievance redress process, and appeals. 10. The CLG coordinator played a key role in communicating with local communities by holding regular consultation sessions and by managing grievances. The CLG coordinator maintained a separate grievance database for each project under the investment program, which logged basic data related to the complaint (date lodged, name and address of complainant, description of complaint), an action plan to resolve issues, and updates on issue resolution. 11. The CLG coordinator recorded 50 project-level complaints from local residents during project implementation. All of these issues were addressed. Complaints include environment issues (archeological site, burial site, irrigation), resettlement issues not identified under the LARP, and works-related issues (crossings for livestock and agricultural machinery, sidewalks, access roads). The CLG system proved to be effective in resolving complaints, as the system provided an avenue for interaction, coordination, and collaboration among stakeholders to resolve issues. The PMC’s grievance database was helpful in monitoring progress toward resolving complaints.

Appendix 14 47

PROJECT OVERALL ASSESSMENT

Criterion Weight (%) Assessment Scorea Weighted Rating

Relevance 25 Relevant 2 0.50 Effectiveness 25 Effective 2 0.50 Efficiency 25 Efficient 2 0.50 Sustainability 25 Likely to be Sustainable 2 0.50 Overall Assessmentb Successful 2.00 a

Rating range: 3 = highly relevant/effective/efficient/most likely; 2 = relevant/effective/efficient/likely; 1 = less than relevant/effective/efficient/less likely; 0 = irrelevant/ineffective/inefficient/unlikely

b Highly successful: Overall weighted average is ≥ 2.7; Successful: overall weighted average is ≥1.6 and < 2.7; Less than successful: overall weighted average is ≥ 0.8 and < 1.6; Unsuccessful: overall weighted average is < 0.8.

Sources: ADB. 2006. Guidelines for Preparing Performance Evaluation Reports for Public Sector Operations. Manila. ADB. 2013. Amendments to the IED Guidelines for Preparing Performance Evaluation Reports for Public Sector Operations. Manila.